For years, millions of Americans have planned for retirement with the promise of Social Security. But it’s well known that the program’s long-term funding and sustainability are in jeopardy, and many could soon face the reality of a retirement without this financial safety net. In 2020, Social Security will pay out more in benefits than it receives in funding for the first time since 1982, and this is expected to continue. Barring congressional action, Social Security will only be able to pay around 80 percent of promised benefits by 2035. If this is the case, in Maine – with a population that’s the oldest in the country based on median age – the financial impact on individual savers will be significant. Familiarizing yourself with new changes to the program and creating an adaptable savings strategy can help you prepare for retirement in this potential scenario.

The Current State of Social Security

Social Security is currently facing “long-term financing shortfalls,” according to the Social Security and Medicare Boards of Trustees 2019 Annual Report. These shortfalls will become more evident as members of the baby boomer generation age into their retirement years and are replaced by lower-birth-rate generations entering the workforce. The first baby boomers turned 65 in 2011, and on average, 10,000 will turn 65 each day between now and 2030, according to Forbes. In Maine, nearly 20 percent of the state’s roughly 1.3 million population was already over the age of 65 in 2016, and that figure is expected to swell throughout the next decade. By 2030, all baby boomers will be eligible to begin receiving some of their benefits.

In addition to the long-term outlook, people should also remain aware of a few imminent changes to the program taking effect in 2020, including an end of the “file and suspend” claiming strategy. There will also be anticipated annual modifications, like a new cost-of-living adjustment. A list of this year’s changes can be found here.

Individual Strategies for Saving

1. Save at least 10 percent of your annual income for retirement. There’s no way around it: With the uncertainty surrounding Social Security, you’ll need to put away more of your own money for retirement. You should be saving at least 10 percent of your annual income, and ideally closer to 15 percent. Take advantage of any retirement savings plans offered by your employer, which might include a 401(k), 403(b) or SIMPLE IRA plan. Many employers will at least match a percentage of employee contributions into these accounts. At minimum, contribute as much as your employer will match. Each offers catch-up contribution limits that increase for workers over the age of 50, offering a chance to build savings more quickly.

2. Decrease or eliminate debt by prioritizing higher charge items. Not including home mortgages, the average American has roughly $38,000 in personal debt. To maximize your savings, prioritize paying off big items with the highest interest rates – whether they’re student loans, car payments or other personal expenses. The longer your debt remains outstanding, the more it’ll grow – so work towards paying it off before incurring any major new expenses. Prioritizing these higher charge items can help you reach the recommended 10 to 15 percent income threshold to save for retirement, and the funds will grow further if contributed to an employer sponsored retirement plan or a personal IRA account.

3. Consider a Health Savings Account and contributing the maximum. A Health Savings Account (HSA) allows you to set aside money pre-tax to pay for qualified medical expenses, including deductibles and copayments. For healthy individuals, an HSA can be a more cost-effective option than a traditional health care plan. The funds you contribute to an HSA roll over annually and grow in an account over time. Starting at age 65, they can be withdrawn to cover non-medical expenses as well. In 2020, the maximum individual and family contributions are $3,550 and $7,100, respectively. For those over 55, catch-up contributions are increased by $1,000 for each. To be eligible for a Health Savings Account, your health care plan needs to be defined as a “High Deductible Health Plan.”


While Social Security’s looming depletion date isn’t expected for more than a decade, you should already be thinking about building a savings strategy and preparing for potential changes to the program. Although they seem distant, the potential ramifications to retirement income will be felt by workers in Maine and across the country. Consider your own strategy in this scenario – and be mindful about whether your savings are on track for this uncertain future.

Securities and insurance products are offered through Cetera Investment Services LLC, member FINRA/SIPC. Advisory services are offered through Cetera Investment Advisers LLC. Neither firm is affiliated with Saco & Biddeford Savings Institution where investment services are offered.

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