As millions of baby boomers approach retirement a nagging question persists. Can we count on social security being there when we retire? This is a critical question for the majority of retirees as social security often represents 30-60 of a middle class couples retirement income and 90-100% for lower income families.
In addition, with 90% of pension plans being shut down and replaced by 401K's and IRA's, social security is the only "pension plan" that the vast majority of retirees have.
It's important to note that 401K's and IRA's are not true retirement plans. They should be more accurately characterized as "tax advantaged savings plans". You could outlive your 401K or IRA but you can't outlive social security. It is guaranteed by the federal government to pay for as long as you live. It also offers annual cost of living adjustments (although not guaranteed), spousal benefits, survivor benefits, divorced spouse benefits, children's benefits etc. which are unique benefits when compared to most pension plans.
The question remains, however, will social security be there when I retire. Contrary to the gloom and doom pervasive in the general media, social security is highly likely to survive, especially for individuals who are currently age 55 or older.
The social security trust fund is currently valued at over $2.7 trillion dollars and it is still growing. If no changes are made to the social security program, by 2021 the trust fund is expected to peak at $3.1 trillion. Then, as the giant waive of baby boomers course through the system, the social security trust fund is expected to be depleted by 2033. At that time, tax revenues will still allow social security to pay out 77% of it's obligations.
The reality is, however, that changes will need to be made to ensure the survival of the system. It's not a matter of "can" the system be saved but rather "how" should it be saved. The solution is a political one not an economic one.
For example, estimates have shown that increasing the social wage base from $118,500 to say $130,000 or deferring full retirement age to ages 68 or 69 for people in their 30's and 40's could extend the viability of the fund past 2080! There are numerous options available as we speak but, once again, a political solution is not easy to come by.
It appears however, based on the rhetoric from the previous federal election, that both parties held a position of not making any changes to benefits if you were over age 55. Too many voters, especially in swing states like Florida.
Will changes be made to the system? Yes, it is highly likely that some changes will be made, after all it's a government program. The impact of any changes for those currently age 55 and older will likely be minimal, so include social security in your retirement planning and feel confident that this substantial government pension plan will be there for you.
Ash Ahluwalia, NSSA, CCSCA, MBA