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The Latest Social Security Predictions (and what it may mean for taxes)

The Latest Social Security Predictions (and what it may mean for taxes)

April 12, 2023

Recently, you may have seen reports that the so-called “depletion date” for Social Security was adjusted. This refers to the predicted date when the long-running program will no longer be able to pay full benefits.

Barring action from Congress, the Treasury Department predicts that 80% of benefits will be paid by 2034. This is one year closer than last year’s prognosis.1

However, note my caveat: “Barring action from Congress.” Whenever news outlets cover the "end" of Social Security, it’s generally followed by a call for Congress to right the ship, so to speak. That call comes from the many Americans for whom Social Security is an important part of their retirement income.

Of course, often when there is action from Congress, it means they are approving additional funding for one thing or another. This brings to mind an old Dad joke, 'What is the best way to make sure something lasts forever? Create a government program around it' (I didn't say it was a good joke). With that sentiment, it is more likely that the government will raise payroll income taxes before cutting social security benefits2, but both could have eroding effects on your wealth and retirement lifestyle.

You’ll never catch me predicting the future, but you don’t need a crystal ball to see that this pattern has continued for a long time. To paraphrase Mark Twain’s famous quote, reports of Social Security’s demise have, once again, been greatly exaggerated. That being said, your financial strategy considers many situations, even the very unlikely ones.

Rest assured, if I feel that a major change in public policy is coming, one that will affect your retirement income, you’ll likely hear it from me before you read it in the paper.

1. CNBC.com, March 31, 2023

2. CNN.com, April 8, 2023