Will Social Security be there for you?
At the moment, social security is a popular program despite its many problems and fears many people have about it. It is so popular, in fact, that in spite of all the negative news and political debate it is not likely to go away any time soon.
However, it is in need of an overhaul, not just in its own program, but in the minds of the American citizen as well.
Will Social Security be there Facts
According to the Social Security Board of Trustees, it is estimated that in 2037, these Trust Funds will be depleted due to the fact that people are living longer, and the birth rate is low. Due to more Baby Boomers going into retirement, the ratio of workers to beneficiaries is falling at a staggering pace. In fact, in 2010, 50 million Americans are expected to receive $614 Billion in Social Security benefits. Not long from now, there will be a deficit in the program, as more money will be coming out of Social Security than what is being paid in. Once the Trust Funds are depleted, the taxes that will be paid by workers in the year 2037 will not be enough to pay the full benefit amounts scheduled to those who are entitled to benefits.
However, this does not mean that you will not receive benefits after 2037, but your benefit payments are going to be dramatically decreased. With the amount of workers paying into Social Security versus the retirees who are drawing benefits, beneficiaries will only receive approximately $760 for every $1,000 in benefits that they are entitled to receive. In other words, if you qualify in today’s dollars to receive $2,000 (a very generous number) in monthly benefits, you will only receive approximately $1,520. Can you live on $1,520 per month? Ladies and gentlemen, that does not even pay my mortgage payment. It gets even worse. Going back to the 50 million Americans receiving $614 Billion in benefits in 2010, on average, each beneficiary received $1,023.33 per month in benefits, even when Americans are receiving full benefits, without the decrease that we are facing in 2037. How much do you expect to receive when the Social Security Trust Funds are depleted?
Until now, people drawing social security benefits usually got back more than they paid in. This was basically made possible because funds going into the system from an increasing population provided the base for payments to recipients.
However, this is slowing down, and the number of people applying for benefits is increasing. It is a no-win situation in its present structure.
Mathematically, someone in their 30′s today will only be able to expect monthly benefits about two-thirds of the current amounts when they get around to “retiring”. The current average monthly payment is about $1,171 a month, and the maximum is a bit over $2,000.
Even at today’s levels, most people cannot actually do much more than “survive” on social security alone.
There are things which can be done to the existing system to at least keep future payments at or near current levels. These include pushing back the time at which people can begin collecting benefits, and raising the amount of contributions, either by increasing the percentage deposited by each worker from their paycheck, by increasing the ceiling on annual contributions into the fund, or both. These, and other possible solutions, have been under consideration and discussion for some time, with no real expectation of immediate action. Without them, and perhaps other actions, social security benefits will decline. Even with then, as we can see, people should not expect social security benefits to be their only means of retirement income.
Will Social security be there and what you need to do
I am afraid that the era of planning around and relying upon government programs such as Social Security to provide for us in our retirement years is coming to an end. We all need to start preparing and planning on other measures, in order to take our retirement destinies into our own hands. Do you have a plan?
Are you fortunate enough to efficiently save for retirement through retirement plans and other investment vehicles? In our modern-day and age, it is hard enough for many Americans to just get by on their current earnings, let alone save a portion of their paychecks to fund their retirement years. With pension plans becoming obsolete, and employer matching 401 (k) or 403 (b) plans on a steady 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 spiraling out of control, it is now more important than ever to begin relying on only ourselves to provide the lifestyle that we dream about and look forward to in our retirement years. Will Social Security still be around when I retire? My advice is this, prepare for the future as if Social Security will not 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 an additional income source, and not a living that you are dependent upon.