In this brief video, we delve into the details of the Social Security shortfall and explore its potential implications for your retirement. We discuss the key factors contributing to the shortfall, its potential impacts, and strategies to help you navigate these uncertainties.
We encourage you to watch the video and reach out to our team with any questions or concerns.
Introduction
Hello, I’m Brad Pappas, President of Rocky Mountain Humane Investing. Today I’d like to share my thoughts about the coming potential shortfall in Social Security benefits. Let’s start by talking about why the shortfall is happening in the first place.
Causes of the Social Security Shortfall
First of all, it’s due to declining demographics, whereby the number of people working and contributing to the fund is being overwhelmed by the growing number of retirees. This is not a new revelation, but the political party has been keeping the can down the road for years. Other factors include decreasing birth rates, increases in life expectancy, and payroll tax cuts due to recessions.
The Impact of Immigration Policy Changes
A new wild card has formed that would be the deportation of taxpaying immigrants. That being said, the policies of the incoming Trump administration, if approved, will accelerate the timeline of the Social Security deficits. Trump’s offer to stop tackling Social Security may sound wonderful to retirees, the results of which would be a disaster, because taxes on Social Security benefits are funneled back into Social Security and Medicare trust funds.
Congressional Budget Office Predictions
According to the CBO, or the Congressional Budget Office, before the election, the CBO estimated that the Social Security trust fund would be insolvent by 2034. If President-elect Trump’s agenda passed on the aggregate, the trust fund would run out of money even faster. The promises include eliminating the tax on Social Security that we already mentioned, tips, overtime, imposed tariffs, and expanding deportations.
Accelerated Insolvency and Projected Cuts
The insolvency of Social Security would advance by three years to 2031. The Committee for a Responsible Federal Budget, or the CRFB, believes Trump’s agenda would cause a 33% cut in benefits by 2035. Based on current law, once insolvency is reached, outgoing Social Security funds would be limited to the incoming revenue stream.
Proposed Solutions to the Shortfall
Money going in equals money going out. There are solutions proposed by the CFRB, reducing current benefits by one-third, or increasing the revenue by 50%, which would likely be in the form of an increase in taxes. Or do nothing.
The Impact of Increasing the National Debt
This would mean increasing the national debt to cover the Social Security shortfall, and in addition to increasing the national debt by putting more money into the economy to stimulate the economy and cover deficit spending.
The Uncertainty of Predictions
None of these predictions are written in stone. Too many unknown variables exist.
Conclusion and Strategy
We think it’s best to understand the situation and prepare an investment strategy to anticipate the potential cuts. Thank you for watching. I’m Brad Pappas at Rocky Mountain Humane Investing. I can be reached at Brad@GreenInvestment.com or 970-222-2592.