Seniors Expect to Run Out of Money as Social Security Drop Forecast
Story by Suzanne Blake, Newsweek, 2/24/24
Many seniors expect to run out of money in less than 10 years as economists predict that Social Security will become insolvent by 2033.
According to a new survey from MassMutual, 40 percent of near-retirees say Social Security benefits will be their biggest source of income in retirement. Despite this, more than one-third say their retirement income would not be enough to last them for more than 10 years.
“Seniors or those nearing their golden years are starting to get a bit apprehensive about would they have enough to make it through retirement,” Nadia Vanderhall, a financial planner at The Brands and Bands Strategy Group, told Newsweek. “Even though people can be within retirement for over 30 years, Americans are living longer while things are becoming more expensive.”
The data arrives as economists predict Social Security will become insolvent by 2033 if nothing changes. As more baby boomers retire and fewer young people are entering the workforce, the Social Security program is anticipating benefits to run out. Beginning in 2033, benefits could be cut by 23 percent without major program changes.
To save benefits, politicians have suggested raising the retirement age, increasing payroll taxes and altering benefit calculations. So far, no strategy has been approved, and future benefits remain in limbo, especially for younger generations paying into it.
The Senior Citizens League predicted the cost-of-living adjustment will be only 1.75 percent in 2025, a significant decline from the 3.2 and 8.7 percent increase in 2024 and 2023.
Vanderhall said there’s mounting fear about what will happen if Social Security runs out, and that the system will likely go through many changes in the upcoming years, especially as the cost-of-living adjustment fails to keep up with the inflation Americans are facing today.
With no changes enacted, many seniors will find themselves in grave situations as they struggle to make ends meet.
“We will see an uptick of those in retirement finding themselves having to unretire and head back into the workforce or homeless,” Vanderhall said.
A total of 138,098 adults over the age of 55 were homeless in the United States on a single night, according to the 2023 PIT Count. And as more baby boomers retire without adequate benefits, that number is expected to triple in 2030.
Still, some finance experts caution soon-to-be retirees from becoming too fatalistic about their upcoming retirement.
Michael Ryan, a finance expert who runs michaelryanmoney.com, wants to ease seniors’ concerns about the projected insolvency in 2033.
“It’s important to understand that insolvency does not mean benefits stop or checks stop coming,” Ryan told Newsweek. “It means there would still be enough ongoing payroll tax revenue to pay about 76 percent of scheduled benefits. So any retiree who is currently collecting $2,000 per month in Social Security income today would still collect a check in 2033. In that doomsday scenario, they could still expect to receive over $1,500 per month from Social Security.”
While many seniors haven’t saved enough for retirement, as the MassMutual study showed, insolvency wouldn’t necessarily heighten their concerns too much.
“Many baby boomers have yet to save much money and will likely find themselves in a jam,” Patrick Mish, the CEO of assisted living platform SilverStay, told Newsweek. “Living on Social Security income alone makes it tough to make ends meet.”
For those needing assisted living services in addition to their everyday necessities, the costs can easily add up to $2,000 or more a month, Mish said.
Despite these economic realities, Ryan remains hopeful that the Social Security program will be fixed in time to keep benefits in the years to come.
“Lawmakers have many tools to strengthen Social Security before 2033 without suddenly cutting benefits,” Ryan said. “For those already retired, your Social Security income will not be affected by any future changes.
“Bipartisan cooperation to implement small, phased-in changes is what’s needed to secure Social Security for decades more.”