Social Security recipients are due to receive the largest increase in benefits in seven years. For many recipients, however, the increase in payments will go towards higher Medicare costs.
As of September 2018, over 67.6 million Americans currently receive Social Security benefit payments. More than one in four of the adult population in the U.S. is receiving social security payments.
The Social Security Administration announced a 2.8% increase in benefit payments effective in late December 2018 for disability beneficiaries, and in January 2019 for retired beneficiaries. The 2.8% increase is the largest increase since a 3.6% increase in 2012. Many are concerned that the 2.8% increase may not cover expenses that are rising at a faster rate, including the costs of essential items such as food and housing. The latest increase also affects the premiums for Medicare Part B, which covers doctor visits and outpatient care. Medicare premiums are expected to increase at the beginning of the year, reducing the net increase in Social Security payments.
Social Security was established August 14, 1935, under President Roosevelt. Since then, Social Security has provided millions of Americans with benefit payments. Those payments tick up with cost-of-living adjustments in effect since 1975. The 2019 adjustment of 2.8% represents a steep increase from the 2017 adjustment of only 0.3%.
Over the decades, Americans have become increasingly dependent on Social Security payments; however, for most Americans, social security is only a portion of what is needed to retire comfortably. Unfortunately, Social Security is a major source of income for many of the elderly, where nine out of ten retirees 65 years of age and older receive benefit payments representing an average of 41% of their income. As retirees live longer, the need is still greater.
By 2036, there will be almost twice as many older Americans eligible for benefits as today – 41.9 million vs. 78.1 million. There are currently 2.9 workers for each Social Security beneficiary. By 2036 that rate will drop to 2.1 workers for every beneficiary due primarily to the drop in the U.S. birthrate and wage growth (see Social security to tap into trust fund for first time in 36 years).
The takeaway
With fewer workers and more beneficiaries, the pool of funds is expected to shrink. In 2018, the Social Security program has started, just this year, to tap into trust funds set aside to cover future benefits. Retirement planning can set your mind at ease. Set up time with your Wambolt Advisor for a comprehensive review of where you stand and what you can do to make your retirement more comfortable.
Source: Social Security Administration
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