Given the fiscal challenges facing Social Security, ConocoPhillips employees must plan for retirement - and have a strategy that supplements Social Security benefits - to ensure long-term financial security, 'he said.
But ConocoPhillips employees need to assess their retirement goals now and take advantage of tax-advantaged savings as future adjustments to Social Security benefits could affect their retirement income.'
In this article, we will discuss:
1. Social Security finances are changing because of demographic changes.
2. Solving Social Security's long-term funding shortfall.
3.Impact of COVID-19 pandemic on Social Security and increased benefits.
Social Security is pay-as-you-go; meaning today's workers are paying taxes on today's retirees' benefits. Yet demographic trends like lower birth rates, higher retirement rates, and longer life spans in your area create long-term fiscal challenges. And there are simply not enough U.S. workers to help the growing beneficiaries. Social Security is not collapsing, but the clock is ticking on whether the program can pay full benefits - something ConocoPhillips employees and retirees need to know.
The Trustees of the Social Security Trust Funds annually report to Congress on the program's financial health and outlook. The Trustees estimated in the latest report, released August 2021, that the retirement program will have funds to pay full benefits only through 2033 unless Congress acts to shore up the program. Those days of reckoning are expected one year earlier than originally anticipated, thanks to the economic fallout of the COVID-19 pandemic.
Report Highlights
Social Security has two programs, each with a trust fund in which are deposited payroll taxes collected to pay benefits. Older workers, their families, and Survivors of Workers receive monthly benefits through the Older Age and Survivors Insurance (OASI) program; disabled workers and their families receive monthly Disability benefits through the Disability Insurance (DI) program. The combined programs are called OASDI.
Combined OASDI costs are expected to exceed total income (interest included) by 2021, and the Treasury will tap reserves to pay benefits. Trustees project that combined reserves will be exhausted by 2034. Afterwards, payroll tax revenue alone should cover about 78% of scheduled benefits. OASDI projections are hypothetical because the OASI and DI Trusts are separate entities, and generally, the taxes and reserves of one program cannot fund the other program.
If treated separately, the OASI Trust Fund would be drained by 2033. Payroll tax revenue alone would then cover 76% of OASI benefits.
The DI Trust Fund will be exhausted by 2057 - eight years earlier than estimated in last year's report. When that trust fund runs dry, payroll taxes alone would pay 91% of scheduled benefits.
We remind ConocoPhillips employees and retirees that all projections are based on current conditions, which are subject to change and may not occur.
Proposed Fixes
Trustees want Congress to act soon on the financial problems these programs face so solutions can be less drastic and can be phased in gradually to minimize public impact. Combining some of the following solutions may also soften the effect of one solution.
Raise the existing Social Security payroll tax rate of 12.4%. The employee pays half and the employer pays half (self-employed pay the full 12.4%). An immediate and permanent payroll tax increase of 3.36 percentage points to 15.76% would be needed to meet the long-range revenue shortfall (4.20 percentage points to 16.60% starting in 2034).
Placing a ceiling on wages subject to Social Security payroll taxes (USD 142,800 in 2021) or raising it to zero (USD 142,800 in 2021).
The full retirement age should be raised to 67 for anyone born 1960 or later.
Reducing future benefits. For the long-term revenue shortfall, scheduled benefits would have to be cut by about 21% for all current and future beneficiaries - or by about 25% if reductions were made only for those first becoming eligible for benefits in 2021 or later - immediately and permanently.
The benefit formula that is used to calculate benefits should be changed.
The annual cost-of-living adjustment for benefits is calculated differently.
Pandemic Impact
The 2021 Trustees Report says the pandemic and the severe but short-lived recession in 2020 threw a wrench into Social Security's short-term finances. Employment, earnings, interest rates, and GDP [gross domestic product] all dropped sharply in the second calendar quarter of 2020 and are assumed to rise gradually thereafter towards a recovery by 2023, with worker productivity and thus GDP to be permanently lowered by 1%. Projections also included higher mortality rates for 2020-2023 and delays in births and immigration. Because payroll taxes are rebounding rapidly, the program was not as badly damaged as many feared.
Sharp increases in consumer prices in July and August suggest beneficiaries could face the highest annual benefit increase since 1983 beginning in January 2022. Social Security Administration chief actuary estimates that the 2022 cost-of-living adjustment (COLA) will be close to 6.0% (The official COLA had not been announced as of this writing).
So what's at risk for you?
In all, COVID-19 may have forced some 2.8 million Americans older than expected to file for Social Security benefits earlier than expected because of older workers at ConocoPhillips companies losing their jobs or having health issues, the Census Bureau estimated.
If you regret starting Social Security benefits earlier than expected, you can withhold your application within 12 months of your original claim and reapply later. But you can do this only once, and you must repay all benefits you received. Or if you're fully retired, you can suspend benefits and restart them later voluntarily. Either of these moves would produce a higher future benefit.
Even if you won't need Social Security to live, the benefits could be a good chunk of your retirement income. A rough estimate of your monthly retirement benefit is available on your Social Security Statement - accessible through my Social Security account on SSA.gov - or by registering for my Social Security account. You should start receiving an annual statement by mail if you aren't receiving benefits and haven't registered for an online account.
No matter what Social Security's future holds, you still control your ConocoPhillips retirement destiny. But now may be the time to save more for your ConocoPhillips retirement while you work at a ConocoPhillips company. Wait until you step out the door to think about your retirement income strategy. All information is from the 2021 Social Security Trustees Report except:
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Sources:
1. Munnell, Alicia H. Social Security's Financial Outlook: The 2021 Update in Perspective . Center for Retirement Research at Boston College, Sept. 2021, crr.bc.edu/wp-content/uploads/2021/09/IB_21-15_.pdf .
2. Van de Water, Paul N. What the 2021 Trustees' Report Shows About Social Security . Center on Budget and Policy Priorities, Aug. 2021, cbpp.org/research/social-security/what-the-2021-trustees-report-shows-about-social-security .
3. An Actuarial Perspective on the 2021 Social Security Trustees Report . American Academy of Actuaries, Sept. 2021, actuary.org/sites/default/files/2021-09/2021_SocSec_TrusteeReport.pdf .
4. Johnson, Richard W., and Karen E. Smith. If Social Security Runs Out of Money, Poverty among Older Adults and People with Disabilities Will Soar . Urban Institute, July 2024, urban.org/urban-wire/if-social-security-runs-out-money-poverty-among-older-adults-and-people-disabilities .
5. Wikipedia contributors. Social Security Trust Fund . Wikipedia, last updated Feb. 2025, en.wikipedia.org/wiki/Social_Security_Trust_Fund .
How does the retirement process at ConocoPhillips provide guidance to employees in selecting the most beneficial form of payment? In what ways can employees utilize available resources to maximize their understanding of the pension options offered by ConocoPhillips?
The retirement process at ConocoPhillips provides employees with various resources to guide them in selecting the most beneficial form of pension payment. Employees can access the "How to Choose the Best Form of Payment" link on Your Benefits Resources™ (YBR) to learn more about their options and determine what works best for their financial situation(ConocoPhillips_Your_Ret…).
What steps must be completed by employees at ConocoPhillips to ensure they initiate their retirement process accurately and avoid any delays? How crucial is the timing of these steps in determining the Benefit Commencement Date (BCD)?
Employees at ConocoPhillips must initiate the retirement process by requesting their pension paperwork 60-90 days before their Benefit Commencement Date (BCD). Timing is crucial, as missing deadlines may delay the BCD and associated payments. Completing all steps on time ensures that the retirement process flows smoothly(ConocoPhillips_Your_Ret…).
Given the complexities associated with the lump-sum pension payment option at ConocoPhillips, what considerations should employees take into account before electing this choice? How does the current interest rate at the Benefit Commencement Date impact the lump-sum amount?
Before electing a lump-sum pension payment, ConocoPhillips employees should consider the current interest rate at their BCD, as it directly affects the lump-sum amount. A higher interest rate typically reduces the lump-sum payment, making timing and rate awareness critical(ConocoPhillips_Your_Ret…).
In what ways can ConocoPhillips employees ensure their Pension Election Authorization form is completed correctly to facilitate timely pension payments? What are the implications of not adhering to the required notarized consent for married participants?
Ensuring the correct completion of the Pension Election Authorization form is vital for timely pension payments. For married participants, notarized spousal consent is required, and failure to provide this could result in delays or issues with payment processing(ConocoPhillips_Your_Ret…).
How does choosing direct deposit for pension payments at ConocoPhillips streamline the retirement process for employees? What should employees know about setup and changes regarding direct deposit after initiating their pension benefits?
Choosing direct deposit for pension payments simplifies the process for employees at ConocoPhillips, as it enables automatic payments to their bank account. Employees can set up direct deposit during their retirement process or update it at a later time(ConocoPhillips_Your_Ret…).
For employees considering rolling over their lump-sum pension payment from ConocoPhillips, what procedures should they follow to ensure compliance with IRS regulations and to avoid tax penalties? How can effective planning influence the success of this rollover?
Employees electing to roll over their lump-sum pension payment must follow specific IRS regulations to avoid tax penalties. Effective planning, such as obtaining rollover paperwork and adhering to IRS rules, ensures compliance and smooth fund transfer(ConocoPhillips_Your_Ret…).
What resources does ConocoPhillips provide for employees to calculate and project their retirement income? How can these tools empower employees to make informed decisions regarding their future financial security?
ConocoPhillips provides employees with tools such as the "Project Retirement Income" feature on YBR, empowering them to calculate and project their retirement income. These resources help employees make informed decisions about their financial future(ConocoPhillips_Your_Ret…).
How do deadlines play a pivotal role in the benefits process for retiring employees at ConocoPhillips, and what specific dates must be adhered to in order to avoid payment delays? Can you provide examples of consequences resulting from missed deadlines?
Deadlines are critical in ConocoPhillips' retirement process, as missing them can delay pension payments. For example, requesting pension paperwork after the 15th of the month can delay the BCD by a month, affecting the pension payout date(ConocoPhillips_Your_Ret…).
What are the added advantages for employees at ConocoPhillips who actively seek assistance or information from the Benefits Center during their retirement planning? How can this proactive approach enhance their overall retirement experience?
Employees who seek assistance from the Benefits Center during their retirement planning benefit from personalized guidance. This proactive approach ensures that they fully understand their options and deadlines, enhancing their overall retirement experience(ConocoPhillips_Your_Ret…).
How can employees at ConocoPhillips contact the Benefits Center to receive personalized assistance in navigating their retirement options? What specific resources and support can they expect when reaching out for help?
ConocoPhillips employees can contact the Benefits Center by calling 800-622-5501 or accessing YBR online. The Benefits Center provides personalized assistance and guidance, helping employees navigate their pension options effectively(ConocoPhillips_Your_Ret…).
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