With Social Security trust reserves due to run out as early as 2029 and benefit cuts coming, many retirees are turning to gold IRAs
Will Retiree Income Take a Big Hit in 2034? – Or Much Sooner?
If you’re planning on your Social Security check as a major part of your retirement income, the news that bills are being proposed in Congress to cut benefits is a major concern.
The fear of running out of money in retirement is pervasive in the U.S. Almost half of Americans surveyed have this concern. And their worries may be well-founded. A 2012 paper for the National Bureau of Economic Research found 46.1% of older adults died with less than $10,000 in financial assets.
How much worse the U.S. economy has fared since then with the pandemic, job losses, business closures, and now runaway inflation and the start of another recession depleting savings and driving more households into poverty.
Social Security is in Trouble, so Retirees Need an Alternative Investment Strategy
Social Securing pays out around $93 billion a month to around 65 million retirees, spending more than it’s bringing in, and the estimate now is that it could run out of reserves as early as 2029. When this happens, your benefits may be cut by up to 25% just to keep the books balanced. And that’s not even counting the effect that out-of-control inflation is having on the value your benefit dollars. Every month, each dollar buys less.
These cuts will mean enduring great hardship for many retirees who are dependent on their Social Security savings as their main source of income. Are you prepared for that sort of drop in your income when you reach retirement age? What can you do NOW to offset the devaluation of your retirement savings?
Why is Social Security Running Out of Money?
The OASDI (Old-Age, Survivors, and Disability Insurance) pension program was set up decades ago when the economy was thriving and people lived fewer years after retiring. It provided an income for insured retired workers and their families, as well as for disability or death that occurred during a wage-earner’s working years. This fund built up a trillion-dollar reserve and benefits appeared to be secure.
But with medical advances and improved health, baby boomers began living longer while choosing to retire earlier, and these reserves began getting used up faster than predicted.
According to the August 2021 annual report from Social Security’s trustees the prediction was that this would be by 2034; but with the flood of people opting for early retirement during the pandemic, and now Russia’s war against Ukraine creating shortages and runaway inflation, some experts are predicting it will happen 4 years sooner in 2029.
What Will Happen When Social Security Runs Out?
Although benefits will not disappear completely, unless something is done soon to shore up the OASDI reserves, they will be cut.
The OASI and DI Trust Funds have been acting as a cushion to make up the difference between what Social Security collects from payroll and self-employment taxes and what it needs to pay out as benefits.
However, as soon as these funds runs out of money, benefit checks will be paid out solely from taxation income, which means benefits will have to be cut dramatically.
Current estimates of Social Security cuts stand at an alarming 25% reduction.
Spiraling Inflation is Making Things Worse
The main reason some experts think the pension trust funds will run out sooner is rampant inflation, which has already skyrocketed since their 2021 prediction as a result of the economic turmoil the 2020-2022 pandemic and the unexpected war in Ukraine.
Although the SSA cost-of-living adjustment (COLA) in 2022 jumped by a seemingly generous 5.9%, inflation has already soared so far over that percentage by mid-2022 that many people have had to put off their retirement, and retirees are looking for jobs to supplement their income.
Additionally, the COLA increase is a double-edged sword, since it also means those trust fund reserves will dry up even quicker, and that generous COLA increases in the future are highly unlikely.
What Do Social Security Cuts Mean for Your Retirement Plans?
The federal reserve bank is already raising interest rates in an attempt to slow inflation. Congress will claim the mandate to pass bills to protect the Social Security system either to go ahead with these huge benefit cuts or raise taxes to shore up the fund.
The SSA will not be able to increase the COLA percentage to keep pace with the 2022 inflation rate. No matter how you look at it, retirement savings are going to have to stretch a lot further than they did in the past.
Or, you can do something about it now by investing in a precious metals IRA to keep the value of your retirement savings
Shield Against Social Security Retirement Cuts and Dollar Devaluation with a Gold IRA
Investing in physical assets that hold tangible value, and even rise in value during economic turmoil is the best way to protect your retirement savings. Squeezing just a bit more into your savings every paycheck will also go a long way to protect yourself against Social Security benefit cuts. But even just putting money into a traditional individual retirement account (IRA) or through an employer-sponsored 401(K) has its drawbacks.
For example, the volatility of the stock market, as we’re experiencing right now in mid-2022, means that conventional IRAs that are invested in paper assets are not performing as well as people hoped, and the current skyrocketing inflation has resulted in a dramatic fall in the purchasing power of retirees’ savings.
Gold and Other Precious Metals in an IRA Hold Value and Increase in Value
Physical gold, on the other hand, has proven to be one of the best methods to hedge paper assets against the effects of inflation and an economy in upheaval. Gold and silver are tangible, physical assets, and being finite and useful resources, they have always and will always hold their intrinsic value.
Gold and silver prices consistently move in the opposite direction of stocks and bonds, providing insurance for your portfolio against the shock of a market crash and inflation by balancing out the overall value of your total assets.
The Solution: Open a Gold IRA with a Rollover from a Traditional IRA or 401K
By doing a rollover of 10-20% of your retirement assets into a self-directed IRA, and by making yearly additions until you stop working, you can easily invest in gold and precious metals with all the tax benefits of conventional IRAs, as you build wealth for your retirement.
Start Your Gold IRA Today to Offset the Loss of Your Paper Assets
What can you do right now to hedge against these negative economic forces? — Investing in physical precious metals through a gold IRA to diversify your portfolio is a great way to ensure that you don’t run out of money in retirement.
You can no longer rely on Social Security benefits alone, that’s for sure. Don’t put it off hoping for a “better time” to get started; there is no better time to act on building additional retirement strategies than now.
All investments including precious metals such as gold and silver, involve risk and you may get less back than what you put in. Always consult a licensed professional financial advisor before investing your money. Consumers should be aware that past performance does not guarantee future returns.
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Megan Lee uses her life experience in investing to write about business, finance, economic news, family trusts, retirement planning, precious metals and cryptocurrencies. She has personal experience with buying gold for the past 20 years and recently learned to successfully invest in Crypto. Megan graduated with a master’s degree in Humanities from Wesleyan University, has lived and worked in 12 countries, and currently resides in Portugal.