Will Social Security be around when you retire?

For those of you outside the U.S. or who don’t know, Social security was founded by President Franklin D. Roosevelt in 1935. It has undergone some changes since then, but is essentially a government assistance program to provide retirement, disability, and survivor benefits to beneficiaries funded by U.S. tax dollars.

The Social Security Statement

We just received Linda’s Social Security Statement containing her earnings record and estimated benefits. Within the envelope they included a pamphlet titled “What young workers should know about Social Security and saving.” I am not planning on Social Security being around when I reach retirement age, because you can only go so long spending $2 when you are only making $1. With all the Baby Boomers retiring, there is just going to be a lot more money going out than what is being contributed. You hear concerns about this all the time, but I was interested to find out what the Social Security Administration had to say about the future of the program.

will social security be around when I retire

From the Pamphlet…

Will Social Security still be around when I retire?

Yes. The Social Security taxes you now pay go into the Social Security Trust Funds and are used to pay benefits to current beneficiaries. The Social Security Board of Trustees now estimates that based on current law… In 2017 (it) will begin paying more benefits than it collects in taxes andin 2041, the Trust Funds will be depleted (emphasis added). Because people are living longer and the birth rate is low, the ratio of workers to beneficiaries is falling. Therefore, the taxes that are paid by workers will not be enough to pay the full benefit amounts scheduled.

… Even if modifications to the program are not made, there would still be enough funds in 2041 from taxes paid by workers to pay about $780 for every $1000 in benefits scheduled.

Wishful thinking?

While I am pleased that the government is being honest about challenges ahead for the Social Security program, I think their estimates are very conservative – if not wishful thinking. The way healthcare technology is advancing we will probably be able to keep everyone alive to 100+ in a couple decades – whether they like it or not! 😉 I would be surprised to an increase in our birth rate, and I think seeing a continuing decrease is much more likely. So with both ends extending out, we will likely have a much larger disparity of cash inflows vs. outflows than we do today.

But knowing our government, they will try to find a way to make it work. They are going to have to pay the piper eventually, but no one seems to know when that day will come. Assuming they can always find more money to borrow (a dangerous assumption IMO) things will work out fine and we will all get our Social Security checks each month.


Depending on Social Security for retirement

If you can’t tell, I do not want to be in a position where I have to depend on the government to be able to retire. When ever people ask me about it, I always tell them the same thing – Plan for your retirement like Social Security will not exist. If it is still around, then you will have a nice little bonus. But a lot can change in a decade or two and in the case of Social Security, I don’t think it will be in their benefit.

What about you? Is Social Security part of your retirement plans?

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  1. This post is a perfect example of why retirement planning is so difficult for younger people – there are so many unknown variables. My approach has been to control what I know I can and that is (1) the % of my income that contribute (2) my asset allocation (2) my investment vehicle (Roth IRA). From there everything else is out of my hands.
    As for Social Security it isn’t making me feel too secure these days.

  2. [email protected]

    I think it will be there in some form, but probably not as substantial as it is now. It’s really the bedrock of all government programs, take it away and everything else is suspect. It will be there in some stripped down version at least, but nothing worth relying on.

    That really does put the burden of saving back on us in a very specific way. We’re going to have to return to the Old Days where people saved substantial amounts of their income as a means of survival, not as a way of insuring a golden retirement.

    Best Plan B is to plan on a semi retirement that will include your own saved resources, what ever the government has to offer, and most important, some form of work or business that you can do until the end of life. Sounds cold, but reality is most of the time.

    The real question is: will we embrace that reality??? (???)

  3. Bible Money Matters

    I have a feeling that Social Security won’t be around by the time that I retire. I’m not counting on it being around at least -and I’m planning ahead, planning for my and my family’s future. The moment that you start depending on the government to provide for you, the moment you’ll start being disappointed.

  4. Bri

    I agree that people shouldn’t bank on social security. Of course, in my opinion, that was never the intention of the program for it to be the only source of income for retired individuals but rather to supplement their savings, employer retirement/pension, and family contributions. My husband and I certainly don’t plan on living off of social security when we retire (which is a way off).

    However, I do want to note that the birth rate in our country IS incresing. As odd as it may sound, but in 2007 the birth rate was higher than it has ever been in the US. Here is a link to an article discussing this (http://www.nypost.com/seven/03182009/news/nationalnews/2007_birthrate_breaks_1950s_record_160184.htm). This means that the program may have the working income that it needs to sustain itself through 2041 and possible beyond.

  5. Pedro Moore

    I don’t think it will, I’m consider the gen Y group and social security is never in our every day conversation. May may discuss investing in stocks, saving, 401(k) but never, ever have I heard someone mention social security as an additional income.

    The only time I remember someone mentioning it, is when they are complaining about it being withdrawn from their check.

    It’s sad to say, we are giving away free money right now.

  6. Carolyn

    I don’t plan to fully retire and don’t plan on depending on social security. I’m wondering if some of the things I’ve read about the pending healthcare reform play into the government’s social security strategy. Like denying care for people of a certain age – that way they could drop them from social security too. Just thinking. All the more reason to take care of yourself physically too.

  7. Tom

    The only problem threatening Social Security is a provision in the current tax law that limits taxes on the wealthiest Americans. Currently, you only pay Social Security tax on the first $107,000 of earnings. Income above that level isn’t taxed for Social Security, so people making hundreds of thousands of dollars a year pay the same amount as someone making $107,000. That “cap” is raised periodically, but has failed to keep pace with costs. If it were raised to just $115,000, the system would be fully funded for at least another 75 years. Instead, I’d like to see the cap eliminated out of a sense of fairness. Perhaps then, one in four American seniors would not be living in poverty (that’s another government statistic).

    • Brad

      I agree with raising the cap on s.s. earnings.

    • Philip

      I agree with you too. That is the best idea I have heard for social security in many years! And it would only be fair, especially in today’s economy of increasing disparity.

  8. Rocky

    As an early baby boomer, I expect Social Security to be around for me, at least for a few years. What it will buy is another matter. The country has historically experienced significant inflation several years after the end of major wars. If we don’t figure out a way to curtail our foreign adventures and to reign in health care spending, the economic outlook will be very gloomy for younger generations. I don’t know why this country is so against having a national sales tax. Almost every other advanced country has one. Don’t expect almost all government programs to be funded by the taxes paid by “the rich”. it will never happen.

  9. Wise O'owl

    Social Security is a necessity. People grow old. They haven’t the health, or strength to keep working. Many things happen on the way. Accidents, health issues, death of a spouse. Inflation, deflation, wars, taxes. Making plans is OK on paper, but life is not what you can foresee. When there was no “social safety net”, there was degrading pitiful poverty,and beggars, and “black folks” in desperate poverty, and poor or no housing. Poverty begets ignorance and ignorance begets poverty.
    Social Security is a national need as well as an individual need. Our system needs to be overhauled. It is a national pension for citizens, (both men and women, workers, and non-workers get old and need a good pension). The problem is with the current funding system. It worked OK until Medicare came along, which is outrageously expensive, corrupt, and should be de-linked.
    There should be a means test for the Pension. After all, Warren Buffett, doesn’t need it, but under law is entitled to it ! If your net worth is say 5Million, or so, you do not need the Federal Pension. People with low paying jobs, little education, women, underpaid for years, etc. cannot live on the current amounts. People are being given SSI supplements, who were never factored into what was to be a straight forward pension system. The immigration laws were changed to bring in an endless stream of relatives, and if old, they have been given funds.

  10. Joe

    I agree totally with Wise O’ owl. I do believe however, that the question of social security being around or not is not even relevant. Simply look up the savings statistics of Americans and the myths we have about what we think our standard of living will be when we retire. The two don’t even come close to matching one another. Now imagine all of these retirees with little or no savings and all of the expenses they will still incur through out their retirement years. If social security didn’t exist it would plunge our economy into a depression like that of the 1930’s or worse. Government will find a way to make it happen regardless of how painful to those of us paying in.

  11. Khon Kaen

    For me, Social Security is gravy. It was not part of my retirement plan and if i do get it at 62 or older, it will be extra bonus money. it will be nice if it is still around – could use the extra bucks here in Thailand.

  12. Richard

    With all this fear-mongering going on about SS I can understand why younger generations do not think it will be there for them but there is really no big problem.

    A few small steps are needed now to make sure it last. The SS has been having a surplus and it will continue till 2017. The treasury owes the fund over $2T and all that is needed is a reasonable adjustment in the retirement age to 70 and a slight increase in contributions along with the younger workers now joining state government and universities.

    All new public sector employees should have SS mandatory just like what happened to federal workers some decades back, I forget the exact year. But new federal employees can not get the retirement system I and Pete have.

    BTW, federal workers have never had collective bargaining for wages and benefits.

    Of course, if in the future people live much longer than the age will have to be adjusted again. But for your generation, 70 is fine. You can stop working at 40 or younger but can not collect SS till 70.

    • Brad

      What kind of jobs or pay will be available, and how physically demanding will they be. It is fine for the gov. to say work longer when all you can get are minumum wage or on your feet at age 70 or more, not an office job.

  13. Travis

    The United States will need some form of social security otherwise the government will collapse as we know it. It is in the benefit of Big Brother to pay out social security because this promotes spending. If the older generation has no money then they will not be able to spend and they will depend on their children to take care of them. If their children must take care of them, then their children will have less money to spend. This all leads to a shrinking economy. The government does not want this and I feel they will try to correct the error of their ways. However there is always the chance that they may not be able to correct the problem because they will let it get too out of control. I hope this will not be the case. I feel that there will be some form of social security, but what form and how much is to be seen.

  14. John

    I agreed, you should plan your own retirement, but if the government stops
    collecting our social security tax.

  15. dan

    I believe SS should be protected. We boomers have paid into this for a long time and I look at mine and it is substantial. I do believe we should look at working longer. I like to work and really plan to retire when I can’t work anymore, my personal choice. My biggest worry is that government jobs are growing and driving our economy now. The highest level of six figure incomes with great benefits happen to be government. I don’t understand how our economy can grow this way. I always thought the private sector funded the government but now feel like the government funds the private sector yet gets the funds from the economy and the private sector. Maybe I need to go back to school but I would love some econ 101 on how we can support government if government becomes the largest employer in the country.

  16. Brenda

    I think working longer is a good idea. I’m presently 53 and plan to work as long as possible. The problem it seems to me is that the poorest of us usually do heavy labor type jobs like construction, or say nursing in which lifting patients all day is required. These are not jobs a person in thier sixties will be able to easily continue doing, as health issues begin to rise and finding other employment will also not be very easy in your sixties. I’m not sure what the answer is but saying it is to just “work longer” doesnt take in accoutn the fact that many of us will not be physically capeable of doing the jobs we are now doing and there will be no other jobs willing to hire people in thier sixities.

  17. Michael

    I personally do not believe social security will be around when my wife and I retire. For one simple fact that the younger generation these days would rather demolish and federal or state aide by sitting on their butts and collecting welfare checks, and never plan on contributing to any federal or state taxes by just going and getting any kind of employment.