US Social Security faces various difficulties that require modifications to preserve its viability and adequacy. These include long-term solvency difficulties caused by an aging population and a diminishing worker-to-retiree ratio. Latest estimates predict funds will fail in 2033 or 2034.
Suze Orman, personal financial advisor and bestselling author and podcaster says Social security benefits may have changes. (Source: Yahoo! News)
Waiting Until 70 Years Old to Claim Your Social Security
Although most retirees’ benefits will continue to be paid by taxpayers, the government and SSA will have to make important decisions about the program soon. At some point, taxpayers will face program cuts. Benefit formulas, cost-of-living adjustments (COLA), means testing for high-income earners, and wage cap changes have been hotly debated by lawmakers and experts for years, including personal financial advisor and bestselling author and podcaster Suze Orman. “Social Security and we are in trouble. Orman told Moneywise last year that only we can save ourselves. Three urgent challenges that Orman and others think must be handled immediately are listed here.
Orman has been a “big believer” in higher earners waiting until 70 to claim Social Security. You can collect 24% to 32% more than your full retirement age benefit. She thinks Congress will raise the full retirement age (FRA) for the first time since 1983 when it scheduled gradual increases (which began in 2000). I expect another FRA increase to be a priority when Congress addresses Social Security reforms. Perhaps to 70,” Orman wrote in March.
READ ALSO: Social Security COLA 2024 is Expected to Increase
Social Security COLA Adjustment 2023
Social Security benefits’ 2023 cost-of-living adjustment is the highest ever at 8.7%. According to The Senior Citizens League’s Social Security and Medicare policy analyst, Mary Johnson, “During the period from the start of the COVID-19 pandemic in 2020 through to December 2022, Social Security benefits have fallen short of COLAs by $1,054 on average.” The SSA will calculate the 2024 COLA soon. Inflation has fallen from last summer’s record levels except for the past two months.
Orman doesn’t expect COLA formula modifications because consumer prices are high and unpredictable. To address its declining value, she suggested creating an emergency fund and delaying retirement because you get the COLA for any year postponed after 62. Orman wrote, “That adds to the value of your eventual benefit.” What’s crucial to remember is that the COLA gets credited to more than just Social Security recipients. Orman said that the COLA gets added to your benefit at 62, even if you delay collecting.
Social Security’s payroll tax base is being eroded by rising income inequality. Raising or abolishing the $160,200 cap on taxable wages will help. Most workers’ taxes would not change, while high earners’ taxes would rise depending on whether the cap was raised or repealed. Currently, the program taxes incomes up to $160,200. Orman suggested collecting more from higher earnings to close the program’s gap.
