PAGLIARA: How secure is Social Security’s future?

Social Security has been one of the hottest topics of the past year. Many of you are probably wondering what is going to happen to this federal insurance program, which the retired, unemployed and disabled have depended upon for more than 80 years. Let’s examine the history of Social Security, where it is today and what’s in store for its future.

Social Security then and now

The Social Security Act signed into law by President Franklin Roosevelt on Aug. 14, 1935, looked quite different than it does today — as did the labor force. Originally, Social Security was intended only to pay benefits to the primary worker in a family. When the monthly ongoing benefits began in 1940, there were only 9 million Americans age 65 or older. The number of beneficiaries was about 222,000 and the average monthly benefit for a retired worker was $22.60. The total amount in monthly benefits paid out that year across America — for retirement, disability and widows/widowers — was $4,070,000.

In July of last year, the Social Security Administration’s annual report revealed that the trust that funds Social Security benefits will likely be unable to pay scheduled benefits by the year 2034, the year in which today’s 48-year-olds reach full retirement age. Today, 37 million Americans will receive more than $15 billion in benefits each month. That’s an increase in monthly benefit payout of more than 368,450 percent.

Changes coming to Social Security

What does this mean for millennials? The oldest millennials are turning 36 this year, and in order for them to begin planning their retirement, it’s necessary that they consider Social Security’s future. I think we can all agree that a change to the current system is going to happen, even if no one can predict exactly what that change will be. One of the most commonly proposed changes is to push back the retirement age. Because life expectancy continues to grow with each passing year and many people are working longer, it would seem logical to delay the age that Americans begin receiving benefits. Currently, the earliest you can start receiving benefits is age 62 (at a reduced amount), with full retirement benefits at age 67.

Currently there are several proposals out there from presidential candidates. One of those is to increase Social Security’s current eligibility age by one month every year starting in 2022. Therefore, by 2058, the eligible age for full benefits would be 70, with the option to start collecting reduced benefits at age 65. There is some consensus that these changes should not penalize Americans who are near retirement age. There’s also been talk of means-testing benefits, which is to say that benefits would be phased out for higher-income Americans, and benefits increased for lower earners. It’s also been proposed that those under the age of 30 should be issued individualized Social Security accounts and given the responsibility of managing that money themselves, as you would an individual IRA or 401(k) plan.

A benefit, not a cash cow

More than anything else, we need to remember that Social Security is a benefit. A little something extra. Somewhere along the way in these past 80 years, we began thinking of it as our retirement. The whole kit and caboodle. It is not, and never will be. It’s a supplement for your lifestyle, if you’re fortunate enough to get it one day. But if you want to ensure that your lifestyle is maintained beyond your working years, you need to start planning now. A financial adviser can be a huge help.

The best hands in which to place your future are your own.

Jennifer Pagliara is a financial adviser with CapWealth Advisors LLC, and a proud member of the millennial generation. Her column, which appears every other Saturday in The Tennessean, speaks to her peers and anyone else that wants to get ahead financially.