Will Social Security Retire Before I Do?

People have traditionally seen Social Security benefits as the foundation of their retirement planning programs. The Social Security contributions deducted from your paycheck and the employer matching contributions have, in effect, served as a government-enforced retirement savings plan.

However, the Social Security system is under increasing strain. Better health care and longer life spans have resulted in an increasing number of people drawing Social Security benefits. As the baby boom generation (those born between 1946 and 1964) approaches retirement, even greater demands will be placed on the system.

In 1945, there were 41.9 active workers to support each person receiving Social Security benefits. In 2000 there were only 3.4 workers supporting each Social Security pensioner. And it is projected that by 2030, there will only be 2.2 active workers to support each Social Security pensioner.¹

You should consider that as your income gets higher, Social Security replaces a proportionally smaller portion of retirement benefits. It used to be that you could receive full benefits only after you reached age 65. But in 2003, the age to qualify for full benefits began to increase on a gradual scale. By 2027, the age for qualifying for full retirement benefits will have increased to age 67, where it is scheduled to remain.

This means that in the future you will probably have to wait longer to qualify for full Social Security benefits to start replacing a smaller percentage of your pre-retirement income.

Your long-term retirement planning program should recognize Social Security benefits as playing a more limited role when calculating required retirement income. Indeed, some financial professionals suggest ignoring Social Security altogether when developing a retirement income plan.

Note:  The Social Security Administration will now assist you in calculating your projected retirement benefits. You can call 800-772-1213 and ask for Form SSA-7004, or Social Security Statement, or you can access the form on the Internet at www.ssa.gov. Complete the form, return it to the Social Security Administration, and you will receive an estimate of your benefits.

1 The 2008 Annual Report of the Board of Trustees, Social Security Administration, 2008.

This material was written and prepared by Emerald Publications.
© 2008 Emerald Publications

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