We’ve all heard the rumors that Social Security is broke and that it may not be around for some of us when we retire. How do we know what’s right and whats just rumor? The most reliable information we can depend on must come from Social Security itself and of course take that with a large grain of salt.
If you’ve ever received or looked at your own or someone else’s statement from Social Security, there are two incredibly important sections that you need to pay attention to. The first states “Social Security benefits are not intended to be your only income source when you retire. On average, Social Security will replace about 40 percent of your annual pre-retirement earnings. You will need other savings, investments, pensions, or retirement accounts to live comfortably. Use this Statement as a tool for planning your financial future.” This is a clear warning that many people either don’t know or don’t pay attention to yet one of the most important statements to help us plan for our future ever publicized. Those who rely solely on Social Security benefits have either failed to plan or planned to fail… or both.
The second important statement tops them all and gives us a must more accurate prediction of what we can expect in the future and how bad things are going to get. Here it is folks: “* Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2034, the payroll taxes collected will be enough to pay only about 79 percent of scheduled benefits.” This is very clearly saying that by 2034 we will no longer be receiving the full Social Security benefits we are entitle to. How or why is this happening? It’s simple really, Americans constantly complain about tax raises yet the simple economic laws of supply and demand are completely ignored. We cannot improve or maintain our benefits without increasing revenue. Perhaps people should stop trying to lower tax commitments and worry more about what the consequences are for their families futures.
Even scarier is that past statements stated 2041 and not 2034. If Social Security’s ability to pay has already diminished by 7 years, how much can we depend on this one? Here are the sample statements for those of you who haven’t seen them. Talk to a professional and start planning folks.