Will Social Security still exist when I retire? This is a very serious but valid question on the minds of many American workers. Not only that, but if I’m not going to get Social Security when I retire, why am I forced to keep paying a portion of my hard-earned dollars? I will endeavor to answer these crucial questions in the rest of this article.
So will Social Security still exist when I retire? The likely answer is yes, but more likely a ‘cut down’ version! However, before continuing, let me explain how the system works. For those of you who don’t know, the Social Security taxes you currently pay are deposited into the Social Security Trust Funds. Those funds are then used to pay current retirees and those who have qualified for disability benefits. In other words, the money you pay into Social Security today goes to pay current Social Security Beneficiaries.
According to the Social Security Board of Trustees, it is estimated that by 2037, these trust funds will be depleted due to the fact that people are living longer and the birth rate is low. As more Baby Boomers retire, the ratio of workers to beneficiaries is falling at an astonishing rate. In fact, in 2010, 50 million Americans are expected to receive $614 billion in Social Security benefits. Before long, there will be a shortfall in the program, as more money will come out of Social Security than is being paid out. Once the Trust Funds are depleted, the taxes workers will pay in 2037 will not be enough to pay the full amounts of benefits scheduled for those who are entitled to benefits.
However, this does not mean that you will not receive benefits after 2037, but rather that your benefit payments will be drastically reduced. With the number of workers contributing to Social Security versus retirees collecting benefits, beneficiaries will only receive about $760 for every $1,000 in benefits they are entitled to receive. In other words, if you qualify in today’s dollars to receive $2,000 (a very generous amount) in monthly benefits, you will only receive approximately $1,520. Can you live on $1,520 per month? Ladies and gentlemen, that doesn’t even pay my mortgage payment. It gets even worse. Going back to the 50 million Americans who received $614 billion in benefits in 2010, on average each beneficiary received $1,023.33 per month in benefits, even when Americans receive full benefits, without the decline we face in 2037. How much do you expect? ? receive when Social Security trust funds run out?
Going back to today, with beneficiaries still receiving full benefits, on average these benefits only replace up to 40% of pre-retirement annual earnings. In 2037, when benefits are cut, this only means that Americans will have a much larger shortage of income that they will have to replace with other sources of income.
Currently, Americans must work until age 67 to qualify for full Social Security benefits. If you’re lucky, this leaves you with 10 to 15 years to enjoy your retirement years. Do you really want to work until you are 67? Now, something else to think about! With trust funds likely to run out in the coming years, will the Social Security Administration raise this age for workers to receive the reduced maximum amount of retirement benefits? Which means you will need to work even longer and still receive less benefits than the current beneficiaries that we (taxpayers) are paying for today. With the fact that life expectancy is increasing, this is very likely.
I fear the age of planning and relying on government programs, like Social Security, to support us in our retirement years is coming to an end. We all need to start preparing and planning other steps, in order to take our retirement destiny into our own hands. Do you have a plan?
Are you lucky enough to be saving efficiently for retirement through retirement plans and other investment vehicles? In our modern age, it’s hard enough for many Americans to survive on their current earnings, let alone save a portion of their paychecks to fund their retirement years. With pension plans outdated and employer 401(k) or 403(b) plans in constant decline, saving for retirement is becoming even more difficult. If you fall into these scenarios, what are you going to do?
With government spending and government sponsored programs out of control, it is now more important than ever to start relying on ourselves alone to provide the lifestyle we dream of and hope for in our retirement years. Will Social Security still exist when I retire? My advice is this, prepare for the future as if Social Security didn’t exist. Start planning today! Set yourself up for financial success, and if Social Security is still around when you reach your retirement years, it will be a source of additional income and not a lifeline you depend on.
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