What You Need to Know
- By the end of 2020, nearly nine out of 10 Americans over the age of 65 received Social Security benefits.
- 2100 Act: A Sacred Trust bill could pass in 2022 and shore up the program's shortfall.
- If it doesn't pass, it will become a campaign issue in 2022.
Social Security is the bedrock of the American retirement system. Over 64 million people, or more than one in six U.S. residents, collected Social Security benefits in June 2020. And by the end of 2020, nearly nine out of 10 Americans over the age of 65 received Social Security benefits, according to the Social Security Administration.
For at least 62% of American retirees, Social Security is more than half of their income, and for the other third, it’s almost all of their retirement income, according to Jamie Hopkins, managing partner of wealth solutions at Carson Group.
So what do experts anticipate will happen in 2022 to either shore up or chip away at this government program?
“Sometimes I get asked, is Social Security going away?” Hopkins told ThinkAdvisor. “I respond that, ‘Well if we’re OK with two-thirds of America’s retirees essentially not being able to meet any of their basic needs, then we could [take] Social Security away.” In other words, the program is not likely to disappear.
The importance, and success, of the program can’t be underestimated, Hopkins notes. “The longer we go without fixing it, the harder it is to fix over time,” he says. “We also start to erode confidence in a system that is arguably the most efficient financial instrument ever built, which is a concern when people are like, ‘What could we do instead?’
“Nobody’s ever come up with a better financial instrument than Social Security. To this point, it runs with a total overhead of like 0.5%. There’s nothing as efficient as that on the planet today. That’s as good as it gets,” he said.
Hopkins sees one way to fund Social Security, and that is raising payroll taxes now, which would be about 3.25%.
“The challenge of continuously pushing off Social Security [fixes] every year is it gets harder and harder to fix in the future because the amount you’d have to raise taxes is condensed, and the tax rate goes up,” he explains.
From this tax perspective, it’s pretty straightforward, he says. “But if we wait another 10 years, it will be substantially higher, and the tax burden will feel even more painful.”
Enter a Sacred Trust
More optimistic is Nancy Altman, president of Social Security Works, a lobbying group, who said “We anticipate a lot of movement on Social Security next year, which will have a major impact on [the program],” she wrote in an email.