Will Social Security Be There For Us? Don’t Count On It

In 1935, President Franklin D. Roosevelt instituted the Social Security program as part of his “New Deal”. The purpose was to provide benefits for retirement, disability, survivorship and death. As taxpayers, we pay into this program through payroll taxes called Federal Insurance Contributions Act (FICA), and the money is invested in a government trust fund and then distributed to those who aren’t working due to disability or old age. In essence, social security is a sort of government pension plan.

When is the last time you read your social security statement closely? If you’re anything like me, you probably ripped it open, ran your finger down to the bottom to see what you’re scheduled to receive upon your retirement. That’s if you’re even receiving your annual birthday card from the government in the mail.

What’s interesting is the following statement that appears on the front page of every recent statement that comes directly from Social Security Administration itself:

“In 2016 we will begin paying more in benefits than we collect in taxes. Without changes, by 2037 the Social Security Trust Fund will be exhausted* and there will be enough money to pay only about 76 cents for each dollar of scheduled benefits. We need to resolve these issues soon to make sure Social Security continues to provide a foundation of protection for future generations.”

I don’t know about you, but that statement makes it sound like Social Security will run out of money by the time any of us, as young professionals, will reach retirement. If the government is concerned about the stability of this program, that makes me a little nervous. We can’t rely on Social Security to live on as a sole source of income if we are unable (or unwilling) to work by the time we reach retirement age. This is why Paying Yourself First is more of a necessity than merely an interesting idea. If we live off of our own investments at retirement, the social security income (if it’s there) will be more of a bonus than a last resort, and I don’t think anyone will ever complain about extra money.

So take a minute to reevaluate your financial plan for the future. I understand that we’re young and retirement seems so long away, but I can’t stress the importance of planning ahead. When things get rough, do you think a bankrupt government is going to take care of you?

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~ by Scott L. Clark on September 20, 2010.

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