…or any government-run pension for that matter, read what Bayou Renaissance Man has to say in his post “For the umpteenth time, don’t rely on Social Security.” He points out that governments don’t have to live up to their promises, so don’t expect them to when planning your retirement.
Here’s what you absolutely, rock bottom, need to know about Social Security:
• Social Security is inherently unstable. When Social Security started paying out benefits, we had 40+ workers for every retiree. That dropped quickly, but we still had over 5 workers per retiree in 1960. It’s been going down from there. Right now, we’re under 3, which is too few to sustain benefits at the current rate. By 2029, we’ll be around 2.1, too few to even pretend that this retirement plan can offer “security” to the elderly. But, hey, pretty much all of the people who sold Social Security to a credulous public are dead, so they don’t care.
• Per the Supreme Court, we don’t have a right to any of the money we put into Social Security. What Congress gives, Congress can take away. Keep that in mind the next time you see an indignant meme on Facebook saying that you are owed Social Security because you paid taxes into it.
• The trust fund was always meant to run out once the Baby Boomers retired. If this is a surprise to you, get educated because you don’t know the fundamentals about the very retirement system you plan to depend on to overcome your own lack of retirement saving.
• The trust fund will run out in 2034, per the Social Security Administration’s latest estimate.
• Back in the early 1990s, the SSA estimated that it would run out in 2042 or so. Oops.
• Once the trust fund runs out, benefits will be slashed by about 22% to start.
• However, your benefits have already been slashed because the federal government has been deliberately underestimating the rate of inflation for years. This underestimation will get worse now that cost of living increases are based on the Chained CPI, which I mentioned here.
Since Social Security benefits are already too low for most people to live on without a supplementary income, you can imagine what it will be like in 10 to 15 years. That’s right about the time when the 22% benefit drop will hit.
This is why you must act now to secure a retirement that does not depend on Social Security. It’s not fair, it’s not right, but it’s reality.
So suck it up and start planning.
Update: Welcome, Instapundit readers. This post is meant to be a quick and basic primer on Social Security, but as always feel free to comment on aspects I didn’t mention. For example, I was reminded that Social Security is not meant to be a person’s only retirement…