For years, I have heard older members of my family talk about the future of the Social Security Administration (SSA). And while those conversations almost always ended with the unanimous opinion that the SSA would run out of money before I was old enough to retire, nobody ever explained what that meant.
Now, in my mid-40s, I hear people my age talking about the same thing, and it doesn't sound like much has changed over the years, except for the date they think the funds will run out. However, a new study suggests it's not just the folks in my immediate circle who don't know what the future of the SSA looks like, as 64 percent of those questioned didn't understand this key component. Keep reading to find out what it is.
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When you hear (or read) that the SSA is running out of money, with many experts saying the fund has less than 10 years left, many people don't exactly know what that means. According to a new AARP survey viewed by The Motley Fool, approximately 64 percent of respondents don't know what happens when the account used to fund Social Security payments runs out of money.
Their predictions broke down as follows:
34 percent say benefits will be paid at a lower amount36 percent say no benefits will be paid28 percent said that they had no idea what would happen47 percent believe that payments would be cut in halfSo who is right? 34 percent of people were correct in their belief that benefits would be paid, but just at a lower amount than before.
Related: Seniors Owed Money by the Social Security Fairness Act May Not Realize Their Benefit Has Been Stolen
What Happens When Social Security Runs Out
According to the Committee for a Responsible Federal Budget, the funds that support Social Security retirement payments could become insolvent as early as late 2032. Meanwhile, the official Social Security Trustees Report places the depletion date just a year later, in 2033. Whichever timeline holds true, the ultimate conclusion is a scary one: if Congress does not intervene, benefits will immediately drop to roughly 72% to 77% of what retirees are currently owed.
That is obviously a daunting reality for anyone currently claiming benefits or expecting to claim them in the near future. However, experts say you don't need to panic... yet. That's because many pros suggest people put more time and money into alternative retirement plans, like 401(k)s and IRAs, especially when they can leverage their employer's contribution or match program. While Social Security has been a lifesaver for so many over the years, it looks like it will only serve as a supplement to other retirement programs for people in the future...
Related: Proposed Social Security Change Could Cut Benefits for Hundreds of Thousands of People— Are You One of Them?
Disclaimer: This article is for informational purposes only and does not constitute financial advice.
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