Social Security Expected to Tap Into Reserves in 2018

Social Security Expected to Tap Into Reserves in 2018

June 06, 2018

According to the Wall Street Journal Social Security is expected to dip into its reserves this year. There are many factors contributing to the depletion of the trust fund including an aging population and lower projected tax revenue based on the 2018 tax law. The trust fund will be depleted in 2034 and Social Security will no longer be able to pay its full scheduled benefits unless Congress takes action to shore up the programs finances according to the article.

Without any changes, recipients then would receive only about three-quarters of their scheduled benefits from incoming tax revenues. The report also said that Medicares hospital insurance fund would be depleted in 2026, three years earlier than anticipated in last years report. Absent changes, the program then would be able to handle 91% of cost.

Treasury Secretary Steven Mnuchin said in a statement that the Trump administration's efforts to cut taxes, reduce regulatory burdens would boost economic growth and actually in the long run generate new money for the country's two largest entitlement programs. With all that being said it does not take much to see the demise of the traditional three legged stool model used for decades in financial planning. In the past you would count on your pension, personal savings, and social security.

Today a mere 16% of fortune 500 companies offer a defined benefit plan so it's really up to you in most cases to create your own pension program. You can do this by funding a deferred fixed indexed annuity linked to an index with no risk to your principal since the issuing insurance company assumes all of the risk for you. This is exactly what companies do when they create a pension.

They go to an insurance company or a financial institution and have them create a pension for their employees using a similar model like a differed fixed indexed annuity uses to create a guaranteed lifetime income stream. It's important to plan ahead to make sure you don't out live your money and factor in the effects of inflation to have your income increase overtime to outpace inflation. 

One of the biggest cost to seniors in retirement is the future cost of health care so when creating an income plan using a fixed indexed annuity you want to plan 20-30 years out to cover increases health care cost. Many insurance companies offer riders that can increase or even double your income for a specified period if you're confined to a bed or cant perform certain task on a daily basis. Here is an example of what health care cost could look like over the next 30 years. Click this link Future Health Care Cost.