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Retirement Planning > Social Security

The future of Social Security

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Congress just passed the “Middle Class Tax Relief and Job Creation Act of 2012,” which extends last year’s reduction in FICA tax from 6.2 percent to 4.2 percent. It also extends jobless benefits for the rest of 2012. Meanwhile, the President’s budget projects that Social Security will now be bankrupt in 2022, rather than 2036 as was reported last year.

It seems like the bill should actually be called the “Let’s Hope Americans Aren’t Paying Enough Attention To Realize That We Stole Money From Social Security To Buy Votes And Get Reelected Act.”

They are destroying a program that is vital to our country in order to put a little money into Americans’ pockets to get votes in November. How will we repair this dramatic shortfall? How soon will Social Security go bankrupt if our economy suffers another downturn?

Bankruptcy isn’t a quarter century away anymore; now, it is only a decade away. This means that people who are already on the program will have to deal with the bankruptcy of Social Security.

What will happen when Social Security goes bankrupt? Your prospects and clients don’t know the right answer. So you need to know that answer so you can help them plan for it.

The answer used to be disclosed in our annual Social Security statements, but those were discontinued in 2009. They promised it would be available on the website at, but the website says that they cannot afford to provide that information.

Pay-as-you-go program

So, what happens when Social Security goes bankrupt? Get a copy of the 2009 annual statement and read the front. When the trust fund is exhausted, revenue will only be available from current FICA payroll taxes. According to Social Security, that will only provide around 75 percent of the benefit. Social Security really becomes a pay-as-you-go program.

Ask your prospect or client: Can they afford to lose 25 percent of their income? How do they plan to replace that income?

Then, ask if they really believe that seniors, the biggest voting bloc in America, will allow that to happen? Isn’t it more likely that seniors will force legislation to fund the shortfall with general revenues?

Next, ask whether they think that will create additional problems? Will that lead to higher taxes, lower benefits, inflation and increased volatility? Will those things diminish the value of their Social Security? Do they have strategies in place to offset the damage that will cause?

This is a discussion you can have with every American you meet. It will impact young and old alike. It will have consequences for every American. If you understand what is really going to happen, you can guarantee that your prospects and clients will have a positive outcome.

Social Security may be bankrupt sooner than we thought. Help your clients prepare now.

Van Mueller, LUTCF, ( is an insurance agent, professional writer and speaker and Senior Market Advisor’s 2010 Advisor of the year. Responses and questions can be sent to [email protected].


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