Can You Count on Social Security for Retirement?

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For several years now we’ve all heard about the problems with our social security system and the likelihood that benefits will end soon. Since social security is one of the major sources U.S. citizens depend upon for retirement income, I decided to go directly to the source. The following issues were addressed on the www.socialsecurity.gov web site.

In 1950, the year before I was born, the worker-to-beneficiary ratio was 16.5 to 1. In 2007 the number was 3.3 to 1. In 2041 it is estimated to be 2 to 1. At that time there will be drastic changes in social security, unless steps are taken now to correct the future shortfall. What is happening is the number of individuals contributing is declining at the same time that the number of individuals receiving benefits is increasing.

There are no immediate plans to cut anyone’s benefits before 204l, including disability benefits. Cost of living increases are projected to continue until 2041. The Social Security Administration admits their problems are severe, long term and very large. They also remind us on their web site that social security was never intended to be our only means of retirement income but rather a supplement.

In 2041 the program will be underfunded. The benefit amount is estimated to reduce by 22% but not totally eliminated. The estimated shortfall for the next 75 years is $4.3 trillion. When you add this to other areas of the U.S. budget with serious deficits, it’s critical to remember the information on the social security web site is projected. I question if it is wise to count on social security, even as a supplement to your retirement. If you do, I’d only use it as a very small part of your future income.

The experts believe that negative cash flow will not start until 1017, another nine years, or at about the time I plan to start drawing. Four possible solutions are being discussed now: increasing payroll taxes, decreasing benefits, using other financing sources such as general revenues, and prefunding future benefits through either personal savings accounts or direct investments in the trust funds.

It was interesting to learn that other countries in Europe, even Japan, have serious challenges such as ours in planning for an aging population. In the U.S. baby boomers, women, and the disabled are at greatest risk. For more information and complete studies, see www.socialsecurity.gov. Knowledge is power. When you have the facts you can plan accordingly.

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Filed Under General Retirement, Saving for Retirement 

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