What Will Social Security’s Future Look Like?

Social Security is a safety net many hardworking Americans depend on when they get ready to retire, but just as the baby boomer generation is reaching that stage, experts are expressing concern they could be in for a surprise.

Roger Roemmich, chief investment officer of ROKA Wealth Strategies, whose new book is Don’t Eat Dog Food When You’re Old, is one of them.

“I think Social Security will survive, but I believe they will have to change the system,” he told ThinkAdvisor’s sister site BenefitsPro. “Social Security and Medicare are currently taking over 40% of the federal budget. How radically they change it depends on several variables.”

“The most obvious thing to do would be to increase the age at which people can draw Social Security. Following a historic pattern, it will be a plan that takes 10 years to be fully in place, but the age will be arbitrary. Congress will arbitrarily pick an age. And if you are less than a certain age, the rules may not apply, and if you are above it, they will.”

Roemmich said that most Americans who retire early and begin taking Social Security at age 62 are unemployed or underemployed. Those with higher incomes should not do anything until they reach full retirement at age 66, he advised.

That’s because each year someone delays Social Security between 62 and the maximum retirement age of 70, the benefit amount goes up 6% to 8% a year and grows with inflation from that point forward.

As for what change Roemmich believes is most likely to occur, he said he thinks Congress could raise the full retirement age from 66 to 70.

“If 70 is the new normal, there goes an extra 32% by waiting to draw benefits,” he explained. “Will there be deferral beyond 70? Nobody knows.”

Until such time as the rules do change, Roemmich advises married couples with income to stagger the ages at which they draw full benefits. 

One of them should begin at 66 and the other should use the ability to draw half of their spouse’s Social Security payment while delaying their own account to grow until age 70.

“Somebody who would have gotten $1,600 a month would get another third, so they would get more than $2,100 a month, which makes a huge difference,” he said.

His advice for single retirees with an income is much the same. “In the old days, when you could draw 8% on a CD, the advice was to put it in the bank. But with low interest rates today, even singles should view Social Security as a last resort to get cash flow because growth is so good and it’s guaranteed,” he said.

 ”Unless you think the U.S. government is risky, and if that’s the case, we’re all in trouble,” Roemmich added.

That is precisely what Michael Wall, President and Founding Principal of Wall Financial Group and Retire Well LLC, thinks.