The COVID-19 has precipitated several financial upsets, and one such is Social Security’s investments. Looking at the Social Security’s cash reserves reveals a worrying fact- For the first time since 1982, the balance sheet has been in the red reports gobankingrates.com . In other words, more money has exited from the fund than the intake.
Social Security investments are much akin to any other investment plan and typically have a balance sheet that quantifies the debit and credit. In simple terms, every year, the earnings of the State are determined by the taxes taken from the citizen’s paychecks every two weeks.
Social Security has been funded through payroll tax dollars. Since 1982 the input of funds was always greater than the exit. By 2020, Social Security’s assets rose from $20 Billion to a mind-boggling $3 Trillion!
Social Security cash reserves are red.
However, since the COVID-19 pandemic has hit the world, the situation has shifted dramatically. For the first time in history, the Social Security cash reserves are red. What led to this situation? A closer look will reveal the ills which have caused such a drastic reduction in the cash reserves of the Social Security reserves.
An already-aging baby boomer population and global pandemic precipitated a colossal wave of resignations and early retirements beginning in late 2020. It led to a massive erosion of Social Security cash reserves. This sudden pressure on distributions further aggravated the depletion.
Social Security reserves could fall to $1.35 trillion in the next eight years.
Experts, including the Board of Trustees for the Social Security Board, predict an even more frightening future scenario. They estimate that the Social Security reserves could fall just to $1.35 trillion in the next eight years.
It only brings the need to have a retirement plan and adhere to it as the person ages. Social Security checks remain the mainstay for millions of Americans who have retired. The Social Security Checks are vital to basic needs such as food, shelter, and medication. Therefore, it is crucial to look for another source of income like the 401k, IRA, or individual brokerage account as a hedge against a shaky Social Security environment.