According to the trustees’ annual report released Monday, the Social Security Administration’s trust funds, which are essential for the payment of benefits, are projected to run out in 2035, a year later than previously planned.
By the projected date of exhaustion, it is estimated that only 83% of the benefits will be able to be paid if Congress does not take measures to avoid this deficit.
The Social Security administrators explained that this improvement in the outlook is due to an increase in the number of contributors to the program, driven by a strong economy, low unemployment rates and a growth in employment and wages. Last year, the trustees projected that the funds would last until 2034, when 80% of the profits could be covered.
“This year’s report is a measure of good news for the millions of Americans who depend on Social Security, including the roughly 50% of seniors for whom Social Security is the difference between poverty and living in dignity — any potential benefit reduction event has been pushed off from 2034 to 2035,” Social Security Commissioner Martin O’Malley said in a statement.
Retirement Scenarios: The Different Ages
Let’s use the example of a fictional man named John Stevenson, and what would happen if he retired at the various ages for which he is entitled to do so. The decision to retire at age 62 or delay it until age 70 is a personal one.
Scenario 1: Retirement at the age of 62
John Stevenson, considering retirement at age 62, may start receiving his Social Security benefits. However, because you would be taking the benefits before your “full retirement age,” they will be permanently reduced. The exact reduction depends on your year of birth and your annual earnings.
In the case of John, who was born in 1960 and has an annual salary of $70,000, his benefits would be reduced by approximately 25%. This means that instead of receiving his full benefit of about $1,750 per month, John would receive about $1,312 per month.
Despite this reduction, John could continue to work part-time or full-time after he retires, and his additional income would not affect the amount of his Social Security benefits. In addition, he would have access to Medicare from the age of 65. Opting to retire at 62 would give you more time to enjoy your retirement, travel, spend time with loved ones and pursue your hobbies.
Scenario 2: Delaying Retirement Until Age 70
If John decides to delay his retirement until age 70, he will receive his full Social Security benefits. This would mean about $1,750 per month, without any reduction, since you would wait until your “full retirement age.”
In addition to receiving full benefits, John would earn more money by continuing to work into his 70s and would continue to contribute to Social Security for a longer period. However, choosing to delay retirement also means that you would have less time to enjoy your retirement and that there is a possibility that your health will not allow you to work until that old age.
There is no right or wrong answer. John should carefully consider his own financial situation, health goals and retirement plans before making a decision.
