Mike is 58 and hopes to retire from the government in seven years. His wife Diane will be 56 in the spring and plans to retire when Mike does. Similar to most people these days, they are staying at home and have had some time to think about their future and their retirement.
Mike and Diane believe that Social Security will be around for them, but what about their 30-year old daughter and her husband, or their grandchildren? Will the current coronavirus pandemic, with all of the job loss, adversely affect Social Security for future generations? Personally, I believe Social Security will always exist and will be fully funded one way or another. Through thick and thin, I believe that our national retirement safety net will always be there.
Plan Ahead for Retirement and Long-Term Care
First, we’ll take a look at the current status of Social Security according to the recently released trustees report, and then we’ll focus on how the coronavirus pandemic will hopefully not adversely affect the future of the program.
The Status of Social Security
Social Security is a popular program relied on by 69 million Americans. Combined, Social Security and Medicare accounted for about 41% of the federal budget in fiscal 2019; the average benefit was $1,387.26.
According to the annual Social Security and Medicare Trustees’ Report released last week, even if the Social Security Old Age and Survivor Fund is low in 2035, this does not mean the end of Social Security. Here’s what else the Trustees Report has to say (keep in mind the Trustees report did not consider the effects of the coronavirus pandemic, if there will be any at all):
- If the Social Security trust funds get depleted, Social Security should be sustainable, as I mentioned earlier. It just means that the government will need to divert money from other sources, which is done quite often.
- The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, will be able to pay scheduled benefits on a timely basis until 2034, the same as reported last year. At that time, the fund’s reserves will become depleted, but money will likely be reallocated from other areas.
- The Disability Insurance (DI) Trust Fund, which pays disability benefits, will be able to pay scheduled benefits until 2065, 13 years later than in last year’s report.
- The Hospital Insurance (HI) Trust Fund, which pays Medicare Part A inpatient hospital expenses, will be able to pay scheduled benefits until 2026, the same as reported last year.
- The Supplemental Medical Insurance (SMI) Trust Fund has two accounts: Part B, which pays for physician and outpatient services, and Part D, which covers prescription drug benefits. SMI is adequately financed into the indefinite future because current law provides financing from general revenues and beneficiary premiums each year to meet the next year’s expected costs.
Lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare. Lawmakers should address these financial challenges as soon as possible. Taking action sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.
Effects of Coronavirus on Social Security
According to AARP, “Social Security is in good financial shape overall, even though rising unemployment will temporarily reduce the payroll taxes that employers and employees pay into the Social Security system.”
“The CARES Act in general left Social Security benefits alone, but did expand out Medicare and Medicaid to cover more COVID-19 related medical costs,” says Jamie Hopkins, director of retirement research at Carson Group. “The law allows firms to defer FICA taxes of 6.2 percent on up to $137,700 of an employee’s 2020 income. Half of the deferral becomes due at the end of 2021 and the remainder by the end of 2022,” Hopkins says. He assures the public that “(t)he Social Security Trust Fund will be backfilled by general revenue during this time period.”
The consensus is that although many of us have less income coming in overall and less of us are paying into Social Security, the system may get stressed a bit but when employment rebounds, things should go back to normal.
No Changes to Social Security, But Watch Out for Stimulus Scams
“There have been no announced changes to Social Security benefits as a result of COVID-19 and the related stimulus package,” says Justin Lavelle, communications director of BeenVerified.com, a company that accesses public records to verify backgrounds. He warns however that “Social Security-related scams have been the top consumer phone complaint since 2019, and the stimulus relief checks will likely provide a fresh angle for these scam artists to attempt to exploit. So, it’s important to watch out for scammers who are looking for your information or money, especially as fear may override your better judgement.
Plan Ahead for Retirement and Long-Term Care
Even though Social Security should continue to be strong into the future, it’s still important to plan ahead — and there is no time like the present to do so (especially with the 20% discount we are offering on all services until May 31, 2020!) Here at the Farr Law Firm, we stay on top of the strategies you need to put in place to keep yourself and your family protected. If you’ve not done Retirement Planning, Estate Planning, or Long-Term Care Planning (or had your documents reviewed in the past 5 years – or last 3 years if you’re over 65), or if you have a loved one who is nearing the need for long-term care or already receiving long-term care, please call us to make an appointment for an initial consultation. During this pandemic, most people are opting for phone appointments, video conference appointments, and curbside signings (but we are still open for in-person meetings and signings for those who desire it, of course with proper distancing and face coverings):
Retirement Planning Fairfax: 703-691-1888
Retirement Planning Fredericksburg: 540-479-1435
Retirement Planning Rockville: 301-519-8041
Retirement Planning DC: 202-587-2797
About Evan H Farr, CELA, CAP
