Social Security funds ‘rapidly heading to zero’ - what does this mean for your retirement?
Experts are warning that the current trust funds that Social Security rely on are depleting which means big consequences for retirees.
Social Security funds are “rapidly heading to zero”, according to new research Center for Retirement Research at Boston College.
Said funds are usually invested in Treasury securities which are projected to run out by 2034.
Once this happens, only 80 percent of Americans’ overall retirement payments will be payable.
As such, experts are warning that retirees will be awarded a 20 percent cut to their Social Security entitlement if reform is not introduced.
One of the options being considered is investing the money put away for Social Security into stocks instead of stocks.
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The Center for Retirement Research highlighted that this is an approach adopted in Canada and even by the Railroad Retirement System in the US.
The group stated: “But do the demonstrated successes mean that equity investment should be part of a solution for Social Security?
“The prerequisite for such activity is a trust fund with significant assets to invest.
“The current trust fund is rapidly heading to zero; the likelihood of raising taxes to rebuild it is low; and borrowing to do so does not guarantee any additional resources for Social Security.”
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Lawmakers in Washington are also looking closely at this issue with Sen. Bill Cassidy, R-La., endorsing the “big idea” for investing money in stocks on behalf of Social Security.
As part of this proposal, an estimated $1.5trillion would be raised that would be put in an additional fund that will then be invested in stocks.
Based on this plan, no money from Social Security trust funds would be included as part of this separate fund.
Investment would come from borrowing more money, finding funds from other parts of the Budget or selling government assets.
Speaking at a recent AARP forum, Sen. Cassidy cited that this investment fund would get a higher return than Treasury notes.
Some 75 percent of Social Security’s deficit could be covered using this plan with legislators having to find a way to cover the rest.
The senator for Lousianna explained: “Never again will we worry about a Social Security shortfall.
“It always will have enough revenue coming in from the investments to pay scheduled benefits.”
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