COVID-19 has changed the way we interact with others and our ability to work. Currently, one in four worldwide confirmed COVID-19 cases is occurring in the U.S. The halting of economic activity is expected to damage our economy more than any other previous occurrence. While remote work is happening at some companies, many Americans are unable to collect their regular paychecks and are waiting on unemployment assistance from their state. Undoubtedly this will negatively impact Social Security tax collection and the Social Security Retirement System. Here’s why:
While current retirement benefit payments aren’t expecting an impact, future retirement benefits for those currently working will be. The Social Security Board of Trustees previously projected that Social Security’s $2.9 Trillion in reserve assets will exhaust by 2035; COVID-19 will push the depletion date sooner.
This development doesn’t mean that if the reserve reaches zero, there will be no more social security benefits paid to retirees, but that the existing payout schedule isn’t sustainable, primarily due to COVID-19. It may lead to benefit payment cuts for current and future Social Security retirement beneficiaries.
When Americans receive their CARES Act stimulus checks starting in mid-April 2020, there won’t be any Social Security income tax (listed as SSI on pay stubs) taken, nor will it be a source of income for the 2020 income tax filing. Additionally, unemployment benefits checks don’t have Social Security income tax taken out either. Both put additional strain on the Social Security Retirement system even though they help Americans during this pandemic. What can you do to help your future Social Security Retirement benefits reduction?
Consider Purchasing an Annuity. An annuity is a contract with an insurance company that provides a guaranteed stream of income in retirement. You can’t outlive an annuity. With the possibility of future Social Security Retirement Benefits cuts, an annuity can take the place of fixed, guaranteed payments, regardless of future economic impacts such as today.
Additionally, ask your financial advisor to remove Social Security as a source of retirement income from your financial plan. If you do receive benefits, you’ll be happy about the bonus!
Disclosure: Any guarantees are backed only by the claims-paying ability of the issuing insurer.
At Senior Tax Advisory Group, each one of our seasoned professionals is a vital part of your financial team. Our team has experience in all aspects of financial planning. We have what it takes to provide you with a comprehensive retirement plan. Contact us today to schedule an introductory meeting!