For Mark Roberts’ Use: Social Security was created way back in 1935, as a way to provide retirees with supplemental income. For most Americans, Social Security is a significant piece of the retirement puzzle so the future of the system is critical.
You might have heard that Social Security is “in trouble”, but what does that mean, exactly?
Here are a few interesting things about Social Security recently posted by MSN Money…
The Social Security trust funds could run out of money by about 2034. Typically, benefits paid out each year are covered by taxes coming into the system each year. But since there is a bit of a gap between incoming taxes and outgoing benefits, the extra funds are taken from two different trust funds. Those funds are set to run dry by about 2034, unless changes are made to fix the shortfall.
After 2034, Social Security may only pay out 79 percent of estimated benefits. If the trust funds run out of money, the Administration will likely only be able to pay about 79 percent of expected benefits.
About one third of the nation’s retirement income comes from Social Security. Benefits account for about 34 percent of all retiree income; the rest comes from savings, pensions, annuities, and so on.
The retired population is growing rapidly. By January of this year, about 48 million Americans had reached the age of 65. By the year 2035 that number will grow to about 79 million. This is because…
The birth rate has slowed. The Baby Boomer generation is beginning to retire, but because young couples are having fewer babies, there will be less workers to take their places in the workforce. That, of course, means less tax revenue to support Social Security.
Tax revenue will be a big problem. Right now we have 2.8 workers paying taxes to support each person drawing Social Security benefits. That number is already historically low, but it’s getting worse. By 2035 we will only have 2.1 workers paying taxes into the system, for each person drawing benefits.
These facts sound a bit alarming, but rest assured that administrators are aware of the budget shortfall. Political pressure almost certainly means that politicians will be forced to address this problem well in advance of 2035. Still, remember that the onus to save for the future falls on each one of us and we shouldn’t rely too heavily on Social Security to provide the income we need in retirement. If you have any more questions about this, or any other retirement issue, please give us a call and we’ll be happy to help.