Is Social Security Money Running Out? Protect Your Financial Future With Self-Directed Investing
For more than four decades, there has been talk of Social Security money running out. In fact, it’s been discussed by so many people so many times that it’s tempting to simply think it’ll never happen! But Social Security provides income for tens of millions of Americans, so it’s not an issue we want to push under the rug.
At the time of this writing (December of 2022), experts predict that Social Security reserves will run out of money by 2035. (If you remember my article from June on this topic, that’s a year later than the 2021 report suggested!)
Maybe we don’t have to worry about what happens if Social Security runs out of money. Maybe legislators will come up with a plan to bolster Social Security’s finances and get the program back on track.
But I don’t think so. And frankly, I don’t feel comfortable leaving the security of my future up to legislators in Washington. Even with ever-changing predictions, the truth is that Social Security reserves are running low and it’s only a matter of time before you or your parents’ retirement income is affected.
So, the time is now to figure out how you’ll provide enough income for yourself in retirement so that no matter what happens, you don’t have to worry if Social Security will cover your living expenses.
How Does Social Security Work?
The original purpose of Social Security was to provide a “comprehensive package of protection against the hazards and vicissitudes of life.” Essentially, Social Security was developed to provide a social safety net for the people who worked tirelessly to support America by supporting them after their working years.
Great intentions, right? Absolutely. Because Social Security doesn’t just benefit retired persons. It also helps their surviving dependent children and spouse as well as workers with disabilities.
Almost all tax-paying Americans contribute to Social Security (with a few exceptions). We all pay 12.4% our income in Social Security tax. (If you’re self-employed, you pay the full 12.4%. If you work for someone else, your employer covers half the tax bill for you.)
But keep in mind, the money you pay isn’t held in a personal account waiting for you to tap into it when you retire. The money is constantly flowing into the Old-Age and Survivors Insurance (OASI) Fund and the Disability Insurance (DI) Fund—where it’s invested in Treasury securities—and out to the people who need it right now. The idea is that when you’re ready to take Social Security, the youngins’ taxes will pay into the fund to support your generation’s payments.
But the problem we’re facing now is that there are fewer people contributing to the workforce and more people taking from the fund. Not exactly an ideal situation.
Is Social Security Really Running Out?
The short answer is yes. With the boomer generation heading into retirement and fewer people in the workforce, payroll taxes are no longer covering the benefits being paid out. There is a disproportionate amount of money being taken from the reserve every year, depleting the cash reserves of the OASDI Funds.
Now, this doesn’t mean all Social Security will be lost. But it does mean that the reserves are predicted to be depleted by 2034, with continuing tax income only able to sufficiently cover 77% of the scheduled benefits.
So what will happen if the OASI Fund does run out of money? Well, in that case you will simply have to rely on other income in your financial portfolio to support you and your family. This is why it’s essential to invest in income-producing assets now.
The Alternative to Social Security: Income-Producing Assets
Up to this point, most Americans have funded their retirement through a combination of Social Security benefits and the interest earned from growth assets like stocks and bonds. And for a while, this method worked just fine.
But today, you have to save and invest extraordinary amounts in the markets if you want to live even a moderate lifestyle in retirement. And not everyone can or wants to increase their retirement savings tenfold just to generate a meager income down the road.
With the impending reduction of Social Security benefits—not to mention crushing inflation and wildly unpredictable market volatility—new retirement income strategies are warranted. The best strategy is to figure out how to make your money work harder.
Investing in alternative income-producing assets could make the difference between paralyzing anxiety or the confidence that you can not only weather any storm, but financially thrive in your golden years—regardless of what the future may hold.
Contributing to a self-directed IRA to invest in alternative assets provides you with opportunities to make your money work harder for you by investing in assets that you know inside and out. My clients invest in a huge variety of alternative assets based on their individual expertise and preferences, assets like:
All of these are great options to give your financial future a more stable environment to grow. The beauty of income-producing assets is that the money you receive is more predictable, consistent, and reliable compared to stocks and bonds. This is because your income isn’t based off the interest you’re earning from companies you have no control over. Instead, it’s coming from rental/lease payments or interest on loans/companies you have a say in.
Don’t Depend On Uncle Sam: Take Charge Of Your Future
While the thought of Social Security running out—or even facing a reduction—is certainly cause for concern, you don’t have to sit idly by worrying about it. Instead, starting making preparations now to ensure your financial security during retirement.
I fully understand the overwhelm that can occur when you need to make investing decisions that are meant to provide you with a future income. It’s only natural you want that income to be reliable. But failing to take action can only end in disaster.
A self-directed IRA can allow you to take charge of your hard-won savings and invest in alternative assets that aren’t privy to chaotic market fluctuations. To see how we can help you can get started, I invite you to schedule a complimentary meeting by calling 312-869-9394 or emailing steve@ctasira.com.
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*The content and opinions in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
**CTAS professionals are not financial advisors and cannot provide advice or recommendations regarding specific investment decisions