Michelle Singletary shares why the Social Security news isn’t as scary as it sounds and what retirees can do now.
If you’ve been following the Social Security news lately, chances are you’ve seen words like shortfall, cuts, and insolvency. Not exactly the kind of headlines that make retirees — or anyone planning for retirement — feel confident about the future.
That’s why this week, we turned to Michelle Singletary, the nationally syndicated personal finance columnist for The Washington Post. She joined Jean Chatzky on the HerMoney Podcast to cut through the noise about Social Security benefits, clear up the misconceptions, and share her best advice for retirees, near-retirees, and younger generations.
What The Social Security Shortfall News Really Means
Jean Chatzky: The latest Social Security report suggests that the shortfall could be coming for the trust fund sooner than expected in the next decade or so. The year that I keep seeing splashed about is 2033. What does this Social Security news actually mean for people who are in retirement or near retirement?
Michelle Singletary: What they are forecasting, if nothing changes, is that benefits could be cut anywhere from 20 to 25%. So your Social Security check won’t go away, but it could be cut.
And so what I think people should expect is that in the next several years, if not sooner, there will be changes in how benefits are calculated for people who will be coming into the system. The full retirement age might be lifted as it was in the past. They might move it to 71 to 72. Those are the kinds of things that could change. So I’ve been telling people who are retired, don’t worry. But if you are younger, then you are gonna have to plan a little differently because you’re going to either have to wait longer to get your full benefits, or you might not get as much as you would if you filed within the next couple of years.
Why So Many Americans Are Claiming Early
Jean Chatzky: As you mentioned, the full retirement age is 67, but people can claim it at age 62, and recently, we’ve seen more Americans do that. What do you think is driving people to claim earlier when they had been delaying more than in the past?
Michelle Singletary: I think a lot of people are afraid of exactly all the things that we just said, that there will be changes made, and if they go ahead and collect now, they will be grandfathered in. So for some people, you gotta collect when you need to collect, you hit 62, and you need that money. The longer you wait every year, those payments go up. When you hit your full retirement age from full retirement age until 70, it’s about an 8% return every year. There’s nothing in the market that can guarantee you that. And so if you can wait, it’s a good return on your money to do so.
And so I think people are just scared I won’t ever tell you not to be afraid and scared because you have to feel what you need to feel. But don’t act on that. Really look at your financial situation, and does this make sense for you right now? We don’t know what’s gonna happen in the future. Maybe it’ll be worse, but maybe it’ll be okay. And so just look at that, and if you know that you’re gonna be on the edge. And even a year waiting a year to get your full benefits, it’s going to really hurt you, then it makes sense for you to start collecting now.
Social Security News: The Bottom Line
Jean Chatzky: I want to turn to Millennials and Gen Z because I’ve heard many people in these generations say, Social Security just is not going to be there for me. They’ve internalized this message. They’ve started to write it out of their planning. From your perspective, is that a good thing or a bad thing?
Michelle Singletary: It is a bad thing. They’re giving in to the conspiracy theories. This is such a huge benefit, and it’s going to be there. What form? We don’t know. What benefits? We don’t know. The system might get better.
So what I tell young adults is that I believe that it will still be there, but it might not be in the form it was for your parents. So take that into account and make that part of your savings plan for retirement. You don’t have to be afraid of the stock market. You can put more money in there. And the sooner you do it, the better. It may not be as much as I’m getting, but it can be a part of and should be a part of your retirement plan.
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