Jeff Rossi, President, Peak Wealth Advisors
Right now, workers and their employers each pay taxes equal to 6.2 percent of covered wages. The self-employed pay 12.4 percent of taxable self-employment earnings. Taxes are collected by the Internal Revenue Service and deposited in government-administered accounts called the Old-Age and Survivors and Disability Insurance (OASDI) Trust Funds (aka the Social Security Trust Fund). Revenues to the Trust Fund that aren't paid out for benefits are invested in special U.S. Treasury bonds. There is a concern that since people are living longer and that the assets in the Fund are invested so conservatively that the Trust Fund will run out of money.
There has been a lot in the news recently about the Trust Fund drying up and not having enough assets to pay out to those eligible to receive Social SecuIrty benefits. Per the Social Security Administration, as of 2015, reserves in the Trust Fund were large enough that cash flow will not be a problem for almost 20 years but will be depleted around 2033 if no changes are made to the tax or benefit provisions before then. The likelihood that the Trust Fund dries up is fairly remote. More likely is that the Treasury will alter the program to ensure that the Fund continues on and can pay out benefits to all who are eligible. We've seen some recent changes to the way benefits are calculated in order to close some loopholes, and future changes will likely include increasing the full retirement age (from 67 to 68, 69 or 70), changing the benefit formulas, increasing the amount of tax workers and employers pay into the Trust Fund, or privatizing part of a person's social security benefit.
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