As Social Security trust funds are beginning to run low, the federal government is looking to address the issue. This includes making cuts to Social Security retirement benefits, according to CNBC.
Covisum, a Social Security claiming tech company, released a Social Security benefit cut calculator. The tool — found here — should help consumers and financial advisors assess the potential impact of Social Security benefit cuts on retirement plans.
According to a statement released by Covisum, more people have decided to claim Social Security benefits early because of high unemployment and market instability during the pandemic. This increase in Social Security claims and reduced income from workers has many experts estimating that the Social Security system will run out of funds as early as 2029. This goes against the last Social Security Trustees report, which predicted funds to drain by 2035 with 79% of benefits payable at that time. An official update is expected to be released soon.
“The possibility of benefit cuts due to the insolvency of the Social Security system is not enough to suggest that most people should claim benefits early,” said Covisum’s founder and president, Joe Elsasser. “These calculators allow both consumers and advisors to see what the future could actually look like if they were to experience Social Security benefit cuts.”
Research shows those cuts would likely be less than 25% if they happen at all, he added, as reported by CNBC.
Experts are expecting the federal government to take action and make some changes. These possible changes include benefit cuts, payroll tax increases or a combination of both. It might be tempting to act in fear, but it’s not the best path to take when it comes to financial planning, mentioned Elsasser.
A free version of the Covisum calculator is available to consumers and requires date of birth, benefit amount at retirement age, the percentage of a hypothetical benefit cut and the year that cut happens. CNBC reported that this tool compares the results of a person’s lifespan in five-year increments based on how early they claim, from age 62 to 70, and the impact if the government makes benefit reductions.