When I go on vacation, I don’t feel the need to calculate every single dollar I plan to spend—but I still like to create a general budget so I know about how much I’m willing or able to spend on a given trip. For me, it’s all about planning for what I can while also setting aside a little extra for those inevitable things I can’t plan for.
This brings me to the current state of our Social Security.
In its 2022 annual report on the financial status of the Social Security trust funds, the Social Security Board of Trustees reveals that we’re less than 15 years away from those funds running dry. And on October 10, 2022, Fox Business reported that this year’s cost-of-living adjustment to Social Security could be the largest in decades.
But while the Social Security trust funds running dry isn’t the best news, it may reveal a new opportunity for your portfolio.
Social Security funds are set to run out in 2035, which could mean hundreds of thousands of dollars lost for future retirees.
Currently, the trust funds that feed into Social Security are expected to run out of money by 2035. However, this doesn’t mean a full and complete stop to all Social Security payments. The trust funds are only used to fill the gap between money coming in from Social Security taxes and money going out in the form of benefits.
According to a September 26, 2022, article by Yahoo Finance, the reason the funds are in trouble is that we have increasingly more beneficiaries and increasingly fewer workers. According to the report mentioned above, America went from an estimated 3.2–3.4 covered workers per beneficiary to 2.8 workers per beneficiary in 2021. By 2033, when most baby boomers will have retired, that number could fall to 2.3 workers per beneficiary.
Once the trust funds run out, Social Security Board members estimate that only 80% of benefits will be able to be paid. According to a recent analysis from HealthView Services, this would mean that 35-year-old millennials currently making between $100,000 and $150,000 per year and who live to be 87 would miss out on as much as $675,000 in Social Security benefits over the course of their retirement.
And that number may be about to get bigger.
The expected cost-of-living adjustment may be the largest in decades—and that will have consequences.
The Fox Business article I mention above states that The Senior Citizens League has estimated that this year’s cost-of-living adjustment (COLA) for Social Security benefits may be 8.7%—the biggest bump since 1981. According to Mary Johnson, a policy analyst at The Senior Citizens League, “A COLA of 8.7% is extremely rare and would be the highest [increase] ever received by most Social Security beneficiaries alive today.”
But as the article points out, this increase is also a bit of a double-edged sword. For example, it could push retirees into a higher tax bracket or reduce their eligibility for low-income programs like food stamps. Also, according to Fox Business, “In all, total income taxes paid on that money are projected to climb by 37% this year,” referring to retirees who make above a certain threshold of total income, including their Social Security benefits.
It’s also possible that, if inflation continues to rise, thereby increasing the necessary cost-of-living adjustments, the 2035 deadline given for when the Social Security trust funds run out could become tighter.
It sounds like the “vacation” of retirement may be getting more expensive. But armed with this knowledge, we can now make plans to protect our portfolios. The question is—how?
Diversifying your portfolio may help reduce risk and protect your retirement.
Always plan ahead. That’s a motto I believe in strongly, and with this latest news about our nation’s Social Security, it’s one that I feel is especially important.
If we can expect to receive reduced Social Security benefits or higher taxes on those benefits—or just expect to spend more at the grocery store than we do now—we can take a number of steps to help protect our retirement. We can begin setting a little extra aside to help cover those expenses or find ways to help cut costs for when retirement comes.
Perhaps most importantly, we can work to diversify our portfolios, thereby reducing our overall risk exposure. That way, if we find ourselves nearing retirement during a period of economic volatility, our hard-earned savings will have an additional level of protection against sharp losses.
One way to diversify your portfolio while taking advantage of a time-tested financial hedge and store of wealth is to open a precious metals IRA. This type of retirement account allows you to use your IRA funds to purchase physical gold, silver, and other precious metals, helping you diversify your portfolio with assets besides just stocks, bonds, and other paper-based assets. Owning physical gold can help bring peace of mind while reducing your overall risk exposure. Precious metals have also proven to be capable of significant growth over the long term—an excellent benefit for those who, like me, like to plan ahead.
While we may not be able to rely as much on Social Security as a main source of retirement income, that doesn’t mean we don’t have options. Knowing what may lie ahead gives us the opportunity to act now to protect our financial legacies—and if gold is right for you, a gold IRA may be a great option for your retirement portfolio.
To learn more about the benefits of precious metals, CLICK HERE to request a FREE copy of our Gold IRA Information Kit.