Sunday, March 4, 2012

A Bit of Good News About Social Security

Do you think Social Security is
doomed?
Many people have heard for so long that the Social Security Administration is broke, that a substantial number of people believe that no benefits will be paid in the near future.  However, according to AARP and government estimates, this is not actually true.  In fact, this is one of the common myths about Social Security that needs to be dispelled.

The Truth about Social Security

First, although changes do need to be made if Social Security is going to be able to fully pay all the promised benefits for the next 100 years, there are a number of proposals under consideration that would solve these issues and fully fund the Social Security trust funds for the future.  When people say that "there will be nothing left when I retire," they are actually misinformed.

The Social Security trust fund can continue to pay full benefits until 2037, and about 75% of promised benefits after that ... and this is true even if they do absolutely nothing to solve the projected Social Security deficit. In even this worst case scenario, there may not be as much money available as we have been promised, but there will certainly be benefits paid to everyone who has earned them.  In addition, with a few little tweeks, such as raising the cap on the wages that are subject to the Social Security payroll tax, the shortage could be avoided and there could be enough money to meet all the promised future obligations.  One way or another, Social Security will be there when you retire, although you may not receive as much as you hoped.  In truth, most people cannot live on Social Security alone anyway.  Everyone should be saving as a way to supplement what Social Security does provide.

Few People Could Produce Better a Higher Income Than Social Security

Second, many people believe they could invest the money better themselves.  There is nothing preventing these people from investing some of their income in a 401(k) or IRA and seeing if this is true.  The truth is that very few people have managed to invest their money in such a way that they can get the return that Social Security will provide them.  However, it is highly recommended that everyone put aside as much money as possible in their own retirement accounts so they can have a more comfortable retirement than they could manage on Social Security alone.

Social Security is meant to provide a base of income for everyone who has worked during their adult life.  They receive this money whether or not they are able to invest their own money well.  Currently, Social Security provides the majority of retirement income for at least 1/2 of Americans over the age of 65.  In fact, it provides 90% of the income for single senior citizens.  If the government stopped collecting Social Security taxes and eliminated Social Security benefits, most of these people would end up on other government programs, such as welfare, and general taxes would have to be raised to cover those services.  Social Security works, and works well, for people who have worked hard all their lives and deserve a secure pension.

The Future of Social Security

Personally, I was relieved to read this information that was provided by AARP and based on government estimates.  I know that Social Security will be important to me and to other family members when I retire, and I encourage the government to take steps to keep the program healthy and capable of providing all the promised benefits. 

However, even if the current Congress fails to act responsibly, I am relieved to know that the program can keep going on some level until we have some responsible legislators who will make sure the program is solvent.

Meanwhile, I encourage you to write your Congressman and make your feelings known.

If you are interested in learning more about financial planning for retirement, where to retire, health issues or family relationships, use the tabs or pull down menu at the top of the page.  They contain links to hundreds of additional articles.

You are reading from the blog:  http://www.baby-boomer-retirement.com

Photo courtesy of http://www.morguefile.com/

Source of information about benefits: http://www.aarp.org/work/social-security/info-05-2011/social-security-fears.2.html

1 comment:

  1. This is a very important issue. Thanks to AARP for providing a reliable report on the future of Social Security and you for sharing them.

    ReplyDelete

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