I got my first Social Security statement today! What I found very interesting, besides the fact that I do have something coming to me in 40 years (maybe?), is that the Social Security Administration put this handy little newsletter in with my statement, and it is entitled “What young workers should know about Social Security and saving”. I found it interesting and so I thought I would share some highlights from it!
Will Social Security Still Be Around When I Retire?
The biggest question/doubt I have is whether Social Security will be around when I retire? Everyone keeps talking about how Social Security is paying out more than it takes in, and how it will be exhausted in 2037 (which is about 15 years before I ‘should’ retire). So, here is what the government says: ‘Yes!”
According to the report, because people are living longer and the birth rate is low, the ratio of workers to beneficiaries is falling, and the taxes paid by these workers will not be enough to pay the full benefit amounts currently scheduled. However, the report continues to emphasize that this does not mean Social Security benefit payments will disappear. The administration estimates, based on current conditions, that even in 2037, there will be enough money generated from current workers to pay beneficiaries $760 for every $1,000 in benefits they were supposed to get. So effectively the benefit schedule would be reduced to 76%.
Social Security: More than Retirement
An interesting fact noted in the newsletter is that there are currently 50 million Americans receiving nearly $614 billion annually in Social Security benefits. That only breaks down to about $12,000 a year per person. A scarier fact is that from two-thirds of the elderly, Social Security makes up more than half of their income.
Also, many Americans need Social Security well before retirement. It is estimated that a 20-year-old worker has a 3-in-10 chance of qualifying for disability benefits before reaching retirement age.
What Does This Mean For Me?
Looking at some of these stats and figures still has me skeptical about what I will receive in retirement from this program. The government has the program set up to essentially NOT guarantee you any benefits: the payroll tax is in a separate law from the benefit program. Thus they can change either/or without as much difficulty.
It also highlights my personal need to continue to save and invest. Even saving a small amount can add up to big savings. For example, if you just invest $25 a week, and the account earned 5% interest, that would grow to $165,000 in the 40 years I have until retirement.
This report also highlights the need to take advantage of savings programs offered to me: 401(k), Roth IRA, and even Long-Term Disability. After that 3-in-10 statistic, it made me worried about what could happen.
I don’t know, but those are my thoughts.
What are your thoughts about Social Security? Do you think it will last until you retire? How else do you save?
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
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