Retirement

A Teachable Moment about Social Security Benefits

June 25, 2015 • By

Last Updated: June 25, 2015

Three young workers surround a computerIt appears we have a knowledge gap among younger workers when it comes to Social Security. Recent analysis from the nonpartisan Employee Benefit Research Institute (EBRI) shows a quarter of younger workers believe that Social Security will not be part of their income in retirement. This compares with 13% of those over 45 who believe the same thing.

Younger men are more likely (29%) than younger women (21%) to say Social Security will not be an income source in retirement. And 41% of the nonbelievers have talked with a professional financial advisor about retirement planning, suggesting there are advisors out there who are discounting Social Security, too.

Younger workers who have estimated their Social Security benefit are more likely to believe it will be a source of income in retirement (28%) than those who haven’t (20%).

It appears we have a ‘teachable moment.’ For the average worker, Social Security may replace about 40% of preretirement income. It’s important to factor this benefit into their retirement planning. Think about how much of an impact 40% can have. If you’re training for a marathon, would you want to run 36.5 miles? Or stick with 26.2, which is 40% less of a trek. When you’re figuring out how much you need to save for retirement, isn’t it good to know that about 40% of your goal is automatically covered?

An easy way for workers to understand the role Social Security will play in their retirement is to go online to create a free my Social Security account today and get an estimate of future benefits.

Some of the knowledge gap may instead be a confidence gap. Under the intermediate assumptions of the 2014 Trustees Report, Social Security will be unable to pay full retirement benefits starting in 2033. If nothing is done by our lawmakers, benefits will be cut by about a quarter after 2033. Closing the funding gap would also likely help close the confidence gap.

Kathy Stokes is a communications consultant. She is the director of the American Savings Education Council, a national coalition of private and public sector institutions committed to making retirement planning and saving a priority for all Americans. ASEC is a program of the EBRI Education and Research Fund.


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Director, American Savings Education Council

Comments

  1. Camille

    I am 68 and could not afford to live off my s.s. I worked hard all my life was a divorced mom raising my children and now I live in my daughters house and also had to get a part-time job to get by. I don’t have any investments or savings or pensions nor do I get over 2000 a month like others. it’s very sad to be in this situation and will probably keep working until I die.

    • HunterSThompson

      See the 110+ posts prior that SS was not meant to live off of. I feel bad for you, I really do, if it were my parent, I would do all I could to see them through. But don’t blame the system. The facts are out there, the information is out there.

      • Kathy, r.

        To the generation that comes after the baby boomers: we the boomers are a large group of people there will need home healthcare and hospital care.
        Prepare yourself for this by obtaining summer jobs as Nursing Aides or some form of medical assisting. You will be needed. Go into the military if you can’t find a job after high school and put in your 20 years and retire. While you’re there start you college education at a night or day college to prepare you for when you retire. Create multiple sources of income to fuel your retirement by retiring from more that one company.

  2. MThompson

    Because the politicians make the laws!

  3. Darius v.

    Please help me I am a deaf I need to account SSA and number

    • Lorenzo D.

      Darius, Social Security has a national toll-free telephone service for TTY users: 1-800-325-0778. This service is available from 7 a.m. to 7 p.m. local time, on normal business days. When callers dial this number from a telephone with TTY data equipment, they are connected to a TTY agent. We also provide several reasonable accommodation options to ensure that we communicate effectively with you. We hope this information helps!

  4. Barbara

    I would like to know why is it that when the average person retire with only there social security to live off of and no other means, we can only receive maybe half of what we earned or in some cases less than half, but when our representatives leave office they get the full amount they were getting when they were in office. Why is that?

    • Lisa

      Because, sadly Barbara, life is not fair.

  5. Sylvia

    Julie you are 100% correct! I don’t think that anyone in their right mind should ever plan on living off social security alone. You should have a 401k, 403b, savings and or a pension if you are lucky. I retired last year, am lucky to have a pension, social security, mutual funds, sep-Ira and savings. We have to teach our children the importance to begin planning early so that they too will have the money they need to make it in retirement.

  6. Lety

    SS was not meant to be your ONLY income source for your retirement years. The same goes for Veterans pensions and disability payments. Our system is not equipped or designed to meet those needs. The SS and other assistance programs are meant to be there as a bridge to ensure you have enough.

    • Lisa

      My father has no pension and lives entirely off of his $1500 a month social security benefits. Fortunately his house is paid for. He lives simply.

  7. CONNIE

    I will be 64 soon and plan to start drawing SS at age 66. If and/or when cuts are made to monthly payments will I be affected? I’ve been paying into social security since age 16 and count on having that income for my retirement years.

    • Lorenzo D.

      Thanks for your question, Connie. According to the Social Security Board of Trustees, the combined assets of the Social Security trust funds are projected to be depleted in 2033. If Congress does not act before then, there will only be sufficient income coming in to pay 77 percent of scheduled benefits. For more information, see The 2014 OASDI Trustees Report.

  8. Julia

    I am one of those over 45 who believe that Social Security will most likely not be there for me. I can already see that while my mother got a check month she was not able to live off that amount and the same for my mother-n-law. Both of which had to move in with my husband and myself because they did not plan on having any other back ups. SS will most likely still be around when I retire but I will not be able to live off of it unless I invest in other accounts. Right now I make twice the amount I will get from SS when I retire in about 9 years. I don’t see how I will be able to survive on 1/2 my income without a supplement. That is what I have been teaching my son to invest now in other place because while it may be there you can’t live off of it.

    • Charles M.

      Social security was NEVER meant to be able to totally live off of. It was ALWAYS meant to subsidize ones retirement.

      • Gayle W.

        We all know that most people will have to live on Social Security because very few people can make enough to have a savings…Wake up … Strength is in numbers. Your best bet is to go with something that has become part of our system. Make the government honor the contract that it has made. Why do you think a 401 will be safe?

    • Lorenzo D.

      Thank you for your comment, Julia. You are absolutely right; achieving the dream of a secure, comfortable retirement is much easier when you plan your finances and prepare for the future. Social Security was never meant to be one’s only source of income during retirement. For the average worker, it replaces only about 40% of pre-retirement earnings, yet financial advisors say you’ll need 70%-80% of your pre-retirement earnings to live comfortably. For a strong retirement, you’ll also need income from private pensions, savings, or other investments. Please see our Social Security Retirement Planner for detailed information about Social Security retirement benefits under current law.

  9. Lisa

    While I appreciate that Ms. Stokes is trying to bolster confidence in the availability of Social Security during retirement, her last paragraph goes straight to the heart of why I believe that Social Security will be very minimal or even non-existent in my retirement. Looking at what the SSA claims will be my income when I retire does not make me confident that the money will actually be there. The confidence must come from the politicians who frankly seem primarily interested in thwarting each others’ attempts at resolving issues instead of actually working on the issues.

    • Ricky

      Benefits for current Social Security beneficiaries are primarily funded by the FICA tax “contributions” of current workers. Sure, there are Trust funds that the gov’t has supposedly retained to pay future benefits, but in reality this money has been spent (primarily on the military industrial complex and unfunded wars). What the Trust funds now actually hold is primarily only low-interest bonds (paper promises of our gov’t to repay).

      As the baby boom generation ages, they increasingly file for disability and/or retirement. If one ignores bond interest to the Trust Funds (that really the gov’t has to pay out from other revenues anyway), funds flowing to the Trust Funds has been running in the red since about 2010. Within just two years, the bonds held in the Disability Trust fund are expected to be exhausted. What will likely happen is that the gov’t will transfer some of the excess bonds the Retirement Trust fund still holds to the Disability Trust Fund.

      Balancing between Trust Funds has happened before, though this time Republicans indicate they will oppose it to make the point that deficits flowing from the Trust Funds are becoming increasingly difficult to fund. Within about 19 years (a date that keeps moving & that can really only be estimated), even the Retirement Trust Fund will run out of money. At that point, paying already promised benefits would require the gov’t funding a full 25% of the benefits SSA pays monthly from revenues other than FICA.

      So what will happen? Well long term, it is the strength of the economy that will determine if the gov’t is able to keep its promises. If the overall economy is good, the gov’t will likely find some way to meet its obligations. Several possibilities exist, such as by raising the full retirement age past age 67, though this would be a hardship on those that have physical jobs (as they often can’t continue to work in later years without risking injuries that might haunt them in their retirement years). My favorite solution is to raise the FICA cap (the maximum earnings on which FICA taxes are paid, currently around $115k/yr), or to progressively increase other taxes.

      • Hospitals &.

        If the Actuary is too feeble to tolerate the “pain in the OASDI” and isn’t patient enough to do the extremely difficult math our children are in trouble because the Judeo-Christian calculator they rely (pronounce re -lie) upon, that always equals 666, complicates their looming deprivation of relief benefits conviction on the DI account with genocide.

        Free Disability Insurance Reallocation Tax (DIRT) Act

        To immediately amend the DI tax rate from 1.80% to 2.30%, from 0.90% to 1.15% for employees and from 0.90% to 1.15% for employers under Sec. 201(b)(1)(S) of the Social Security Act 42USC(7)II§401 and amend the OASI tax rate from 10.60% to 10.10%, from 5.30% to 5.05% for employees under 26USC(C)(21)(A)§3101 (a) and from 5.30% to 5.05% for employers under 26USC(C)(21)(A)§3111 (a) to avoid depletion of the Disability Insurance (DI) Trust Fund in 2016 without increasing the overall 12.4% OASDI or 15.3% OASDI and Hospital Insurance (HI) tax-rate under 26USC(A)(2)§1401.

        To amend the DI tax rate again in 2018 to 2.20% from 2.30%, from 1.15% to 1.10% for employees and from 1.15% to 1.10% for employers under Sec. 201(b)(1)(S) of the Social Security Act 42USC(7)II§401 and amend the OASI tax rate from 10.10% to 10.20%, from 5.05% to 5.10% for employees under 26USC(C)(21)(A)§3101 (a) and from 5.05% to 5.10% for employers under 26USC(C)(21)(A)§3111 (a) without increasing the overall 12.4% OASDI or 15.3% OASDI and Hospital Insurance (HI) tax-rate under 26USC(A)(2)§1401 to maximize efficiency until a deficit appears in the OASI Trust Fund in 2020.

        Without Income Limit Law (WILL) Act

        To abolish the maximum taxable limit on DI contributions in 2016 and OASI contributions in 2017 and repeal Adjustment of the contribution and benefit base Section 230 of the Social Security Act 42USC(7)§430.

        To require the Social Security Administration to pay for SSI Costs beginning in 2017.

        To share profits in excess of social security program costs to the general fund of the U.S Treasury on a sliding scale beginning in 2017 DI 50/50 prioritizing the $22 billion + 2% annual growth cost of USPS, and OASI 10/90 to eliminate the federal budget deficit. In 2020 OASI would share at negotiated rates an estimated 25/75, in 2025 OASDI would share 50/50 and by 2030 75/25 and at 2035 OASDI would take all to pay for peak in costs of Baby Boomer generation and might need to raise the overall OASDI tax rate.

        • Ricky

          Eliminating or at least modifying the FICA cap & rebalancing the Trust Fund contributions as you suggest makes sense. I also agree that from an administrative aspect, incorporating SSI within the Social Security program as a “minimum floor benefit” makes sense.

          Unfortunately, from a political aspect, I don’t think combining SSI with SSA has legs at this time. Already the same gov’t employees and offices administer both programs, but the funds used to administer and pay the two programs come from two entirely separate sources. Unfortunately, simply administering both programs through the same offices has resulted in SSA being overwhelmed with complaints that it is those on SSI that have never worked that are bankrupting SSA.

          I will agree with you if your underlying suggestion is that we simplify the SSI program and modify it to essentially serve as an income floor for our country’s aged/disabled social insurance programs. SSI’s current “in kind income” considerations that attempt to determine if its recipients pay their fair share of food & shelter expenses (not counting food stamps or subsidized housing) is often grossly unfairly administered and it adds more to the program’s administrative overhead than the resultant program savings are worth. As an additional item, I think both Social Security and SSI should offer short-term disability, similar to SDI in California. One could think of this as an unemployment type benefit for those that temporarily have become medically unable to work. Currently few workers have such coverage & even short-term disability often results in bankruptcies and serious disruptions to family life.

          Most current USPS employees already pay into Social Security. Other than this, I think USPS’s own retirement system should remain independent of Social Security. If Congress will reverse its current requirement for USPS to prefund within 10 years its expected retiree medical benefits for the next 75 years, & if Congress stops micro-managing that agency preventing it increasing its profits by venturing into other related services, USPS will do just fine on its own.

          • Viki

            I can’t hear annihtyg over the sound of how awesome this article is.

        • HunterSThompson

          Never saw a user name so fitting :
          f the Actuary is too feeble to tolerate the “pain in the OASDI” and isn’t patient enough to do the extremely difficult math our children are in trouble because the Judeo-Christian calculator they rely (pronounce re -lie) upon, that always equals 666, complicates their looming deprivation of relief benefits conviction on the DI account with genocide.

      • Mary

        There is no “Trust” Fund left. Starting with Reagan and ending with Clinton, the fund was spent to cover bad books because they were seen as “just taxes”.
        There was no actual lock box, they would say. They started by leaving IOU’s but ended in just U’s.

  10. Chris

    My so is 9 , how will you guarantee that Social Security will be there when he retires at whatever age retirement is at that time. I have little faith that he will be able to utilize this retirement option in additional to 401k’s and investment accounts such has Mutual Funds , stocks etc.

    • James L.

      Thanks for your question, Chris. According to the Social Security Board of Trustees, the combined assets of the Social Security trust funds are projected to be depleted in 2033. If Congress does not act before then, there will only be sufficient income coming in to pay 77 percent of scheduled benefits. For more information, see The 2014 OASDI Trustees Report.

    • Steve L.

      Of course, any future Congress could raid the Social Security Fund to pay for their latest project, so, there is no reason to believe that anyone will be able to collect anything. Better to make good investments and don’t retire until you have to–like me!

Comments are closed.