The coronavirus pandemic has changed a lot about the way we live, but one thing is still certain: We all still need to plan for retirement someday. As a federal employee, you enjoy some retirement planning benefits that are less common in the private sector. But since we will all be impacted by Social Security, you might be wondering how that program will fare in the future – especially with regard to the latest economic downturn.
Solvency of the program. For many years, we have known that the Social Security trust fund will be exhausted by about 2035. Currently, incoming taxes pay for most Social Security benefits, with any shortfall taken out of the trust fund each year. But when that fund is depleted, taxes will have to cover all of our benefit payments.
That fact has long generated concern, because at projected rates only two-thirds of benefits could be covered by future tax revenue after 2035. At that point, Congress would have to increase taxes, decrease benefits, or perhaps raise the age at which we can claim benefits.
Other potential plans involve means-testing recipients, meaning those with other forms of retirement income might be excluded from Social Security benefits. Again, these are only proposed ideas, and we don’t yet know which direction Congress will take in order to address the budget shortfall.
But now, with more than 30 million Americans unemployed and a potential recession looming, experts have estimated that the trust fund could run out of money about two years sooner than 2035.
What does this mean for you? That information sounds frightening, but there is another, more positive way to look at it: This situation was going to happen regardless, and now Congress might be under more pressure to figure it out a bit sooner. Right now, it’s difficult to predict whether they will choose to raise taxes, means test benefits, raise the retirement age, or something else.
Since you’re a federal employee, the good news is that you will potentially enjoy two other streams of income in retirement (your pension payments and withdrawals from your TSP). So, you’re a bit more protected from Social Security shortages than most people. But we’ll continue to keep you updated as this situation develops, and together we can adjust your retirement plans accordingly.