Will Social Security still exist when I retire? This is a very serious but valid question that is running through the minds of many American workers. Not only that, but if I’m not going to benefit from Social Security when I retire, why am I forced to keep paying a portion of my hard-earned dollars? I will live 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 it is most likely a ‘simplified’ 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 to Social Security today goes to pay current Social Security Beneficiaries.
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. As more Baby Boomers retire, the worker-to-beneficiary ratio is falling at a staggering rate. In fact, in 2010, 50 million Americans are expected to receive $ 614 billion in Social Security benefits. Before long, there will be a deficit in the program, as more money will come out of Social Security than what is being paid. Once the Trust Funds are depleted, the taxes that workers will pay in 2037 will not be enough to pay the full amounts of benefits scheduled for those entitled to benefits.
However, this does not mean that you will not receive benefits after 2037, but your benefit payments will be drastically reduced. With the number of workers paying Social Security compared to retirees receiving benefits, beneficiaries will only receive approximately $ 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 a 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 as Americans are receiving full benefits, without the decrease we faced in 2037. How much? What do you expect to receive when your Social Security trust funds are exhausted?
Going back to today, when beneficiaries continue to receive full benefits, on average these benefits only replace up to 40% of their pre-retirement annual income. In 2037, when profits decline, this just means that Americans will have a much greater income shortage that they will need 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 10-15 years to enjoy your retirement years. Do you really want to work until you are 67 years old? Now, something else to think about! With trust funds likely to be depleted in the next few years, will the Social Security Administration increase this retirement age so that workers receive the decreased maximum amount of benefits? Which means you will need to work even longer and still receive fewer benefits than the current beneficiaries that we (taxpayers) pay for today. With the fact that life expectancy is increasing, this is very likely.
I fear that the era of planning and reliance on government programs like Social Security to provide for us in our retirement years is coming to an end. We all need to start preparing and planning other steps so that we can take our retirement destiny into our own hands. Do you have a plan?
Are you lucky enough to save efficiently for retirement through retirement plans and other investment vehicles? In our modern age, many Americans find it quite difficult to get by on their current income, let alone save a portion of their paychecks to fund their retirement years. With pension plans becoming outdated and the employer matching 401 (k) or 403 (b) plans in a steady decline, saving for retirement is becoming even more difficult. If you fall into these scenarios, what are you going to do?
With public spending and government-sponsored programs spiraling out of control, it is now more important than ever to start relying on ourselves alone to provide the lifestyle we dream of and look forward to in our retirement years. Will Social Security still exist when I retire? My advice is this, prepare for the future as if Social Security did not exist. Start planning today! Prepare yourself for financial success, and if Social Security still exists when you reach your retirement years, it will be an additional source of income and not a way of life you depend on.