Most retirees plan to collect Social Security at some point, for those who are still far away from retirement, you may be wondering what the average Social Security payment will be like in about 15 years, when you are finally ready to retire, or is close to doing so, solving this requires more than simple math, according to Martha Shedden, CFP and president and co-founder of the National Association of Registered Social Security Analysts.
According to Shedden, the current average Social Security benefits are approximately $1,900 per month. No one can predict with certainty what the economy will be like in 15 years or whether inflation will remain stable, but with the help of calculation software, they can do so, a well-founded calculation.
“Assuming a 2.25% inflation rate, the average benefit would be about $2,663 over 15 years,” Shedden said. “However, given historical cost-of-living adjustments (COLA) over the last 20 years of 2.6%, the average benefit amount in 15 years will be closer to $2,802,” in reality, for the person who achieves it raise in 15 years, Shedden said it would still look like $1,907 in his budget today.
Don’t Underestimate Your Benefits
While you may think that people overestimate what they will receive, Shedden said it is more common for people to underestimate how much Social Security they will potentially receive. She and her husband were amazed to learn that together they were entitled to receive approximately $90,000 a year.
“The total lifetime cumulative amounts for some high-income couples who have earned the maximum amount each year are in the millions,” Sheeden said.
The Social Security Is NOT a Business
However, the goal of Social Security is not to make millions, Shedden said, it was made as a program to keep people safe from poverty; for people with lower incomes, it is usually a higher percentage of their total assets than retirement, sometimes between 50% and 90% of what they will retire.
“It’s important for low-income people to be educated and understand exactly what that amount will be,” Shedden said. “Because, for every month and every year that they can delay collection, that amount will increase.”
That increased amount is subject to cost-of-living adjustments for the remainder of their lives; for those living on the poverty line, there is also Supplemental Security Income (SSI). “That’s not really a substantial amount,” commented Shedden, “but it is definitely a critical part of many Americans’ retirement.”
Should I Prepare for Social Security Cuts in 2033 According to the SSA Trustees?
There is a big question about the fate of Social Security, according to Brian Kuhn, CFP and senior vice president of Wealth Enhancement Group, “if we consider the Social Security Administration’s predictions that benefits should be reduced by 23% around 2033 To maintain the stability of the program without legislative intervention, the average benefit would decrease to about $2,182.”
The SSA trustees report is a comprehensive review of the financial status of the Social Security Trust Funds. The report highlights that, if no changes are made, the funds will only be able to pay out about 77% of scheduled benefits beginning in 2033. This means that beneficiaries could see a 23% reduction in their Social Security payments unless Congress enacts reforms to address the shortfall.
Why Cuts Might Happen
The anticipated cuts stem from several factors:
- Demographic Shifts: The aging population means more people will be drawing benefits, while fewer workers will be contributing to the system.
- Economic Factors: Wage growth, inflation, and unemployment rates impact the inflow of payroll taxes, which fund Social Security.
- Legislative Inaction: Without timely interventions by lawmakers, the gap between the program’s income and its obligations will widen.