Don’t expect much help from Capitol Hill.
The annual Social Security trustees’ report is to advise Congress on the financial condition of the Social Security system over the next 75 years. If they project that 100% of benefits will be paid, it’s said to be in balance and no action will be needed. If they project a shortfall, they call on Congress to fix the problem by either raising taxes, cutting benefits, or some combination of the two.
Congress, of course, is in an election year. Democrats, right now, have the only proposal on the table, although it doesn’t address solvency of the system, knowing full well – it’s an election year – they can beat a drum knowing it won’t pass without Republican votes; and Republicans, in an election year, are silent on the issue. Any solution is bound to hurt someone and everyone on Capitol Hill wants votes in November.
The time between now and projected insolvency is thirteen years – that’s six congressional terms and two senate terms. Most in power now know they won’t be facing voters then.
The last major reform was in 1983 when brackets were created for the taxation of Social Security benefits. Those brackets weren’t indexed for inflation; so, with inflation increasing, tax revenue from this source is increasing as well, giving Congress another reason to kick the can.
But, don’t let the solvency issue change your claiming timing. You might be tempted to claim early because you think the system is going broke; but, think again. Even if you believe you’ll see a 20% benefit cut and you think you can capture it by claiming ahead of time, remember that 80% of a higher benefit is more than 80% of a lower benefit realized because it was tempting to ‘game’ the system.
Any strategy, of course, should be determined after a careful analysis that takes many other factors into account. Talk to an advisor. Don’t have one? Hmmmm. I wonder who you could get…..