The 2021 Social Security Trustees Report has been published and reveals that the economic impact of the Covid Pandemic will result in the Trust Fund running out of money one year earlier than previously projected. According to the report, the Social Security Trust Fund will now be depleted in 2033.
Social Security's Disability Insurance program was also impacted, with its benefits fully funded only until 2057 - eight years earlier than in previous projections. Projections for the solvency of Medicare's hospital insurance fund remain unchanged, with an expected full depletion by 2026.
What does this mean to you? If Congress takes no action, retirees should expect to receive 20% less in Social Security benefits in 2034. In reality, Social Security, known as the "third rail" in politics, is unlikely to experience benefit cuts. The same is likely true for Medicare, as well. Many experts, however, including former Comptroller General of the U.S., David Walker, and even the Congressional Budget Office's own analysis, reveal that unless benefits are cut, tax increases will be needed to fund the coming shortfalls.
The big takeaway from this year's annual report is that investors need to be focused on planning to reduce their exposure to Federal income taxes. These taxes, which also impact IRA and 401(k) distributions, are inevitably headed higher to overcome our unfunded liabilities, like Social Security, Medicare and Medicaid, and to pay the interest on our National Debt, now approaching $30 trillion. There is simply an insufficient number of younger people entering the workforce to overcome the cost of funding our fiscal responsibilities.
The inevitability of higher taxes drove the development of our Guided Roth Conversion Program™, which can help our investors reduce or eliminate taxes in retirement. This multi-year process helps transform forever-taxable IRAs and 401(k)s into never-again taxable Roth IRAs. Contact us to learn how the program may help you.