Is Social Security likely to exist in 30 years? At full amounts per current formulas or at some fraction of that? Or just none at all? What do you think and why?
If I was in my 30s, I wouldn’t plan on it. I’d figure any outlays I got would be icing on the retirement cake. At the very least, I’d discount it by about 50% for planning purposes.
My guess is that benefits could be somewhat reduced, maybe paying out something like 60-75% of current rates. But I’ll note that none of my retirement planning has anything to do with my prediction of Social Security: I’d be saving exactly the same in any case.
Despite the doom & gloom, I don’t see it going away, at least not without something very similar from a user perspective replacing it. Expecting the unwashed masses to support themselves in old age through savings and foresight is a non-starter; politically it won’t happen. It also won’t work to tell those of us who have been paying into social security all through our lives that we won’t get it. That would be political suicide.
That said, I can see less money and having to work longer to get it. Realistically, if you want more than a very basic life, even now you need to be saving for retirement. Social security will mostly keep you off the street and fed, but not a whole lot more than that.
Anything you get in 30 years in terms of SSI will be a fraction of what you need and probably not nearly what you put in.
Pretty much this. SS is the primary source of income for two thirds of seniors and provides 90+% of the income for half of those. It, or some similar program will exist as long as the US gov’t is a going concen or someone finds a cure for old-age.
Another vote for yes, expect Social Security in some form to still be around.
If you are smart, you will not count on it as your only/primary source of income, and you will (likely) have a more comfortable retirement.
Think of it as trip money. Nice, but not enough to live on or pay bills.
Of course it will exist. I have heard this concern from younger people for years and cannot comprehend it. Billions of dollars are going in to SS every year and will continue to do so. According to the SSA projections there will be a trough starting in about 15 years where according to their projections, there won’t be enough to pay all the promised benefits. However, that will fix itself as the baby boomers die off. By the time a 30 something is retiring the SS system will be doing OK. And that assumes nothing is done to “fix” the system. Worst case, there will be benefit cuts. But the SS system will remain.
Medicare, that is a different story. One can legitimately worry about the existence of medicare.
And of course the giant budget devouring monster that is the Veterans Care system-both retirement and medical care. That is on course to consume the entire defense budget, VA budget, and keep growing. Unless there are some VERY painful cuts in the future to veterans benefits, and I don’t want to see that nor does anyone else, the existing promises will swamp all other parts of the federal budget. SS and Medicare will be lost in the noise, along with everything else the feds do. You don’t hear about this much for obvious reasons. Any public official who voices concern is going against veterans and would be instantly destroyed. But it is coming.
This is just not right.
The Trustees of Social Security say:
After 2019, Treasury will redeem trust fund asset reserves to the extent that program cost exceeds tax revenue and interest earnings until depletion of combined trust fund reserves in 2033, the same year projected in last year’s Trustees Report. Thereafter, tax income would be sufficient to pay about three-quarters of scheduled benefits through the end of the projection period in 2088.
So long-term, the system cannot continue as it exists now. Neither can Medicare. Veterans Affairs will be costly as well, but not nearly as big a problem as those two programs.
A government that is in deep financial doo-doo has three options. Raising taxes and cutting spending are two of those options, and they’re the ones that people generally are most aware of. For Congress and the President, those options are always costly.
The third option is to inflate the currency. Most people aren’t paying attention when this happens, or if they are, they don’t blame it on politicians as much.
In about 20 or 30 years, the government of the United States will be careening towards insolvency, unless major changes are made before then. Historical examples from other countries suggests that politicians will implement all three approaches: higher taxes, spending cuts, and inflation. But inflation will probably be the largest part of their solution.
Which effectively answers the OP : No, you shouldn’t plan on using social security 30 years from now, because the payments you receive won’t be enough to cover the inflated cost of living.
There are of course multiple reasons for saving substantial sums of money besides retirement: long spells of unemployment, disability, buying a house, starting a business, helping relatives/friends when they are in major trouble, going back to college to study in a new field, moving across the country and starting anew, raising kids…
The fact that the trust fund will run out doesn’t mean the system is in danger. Social Security has always been mostly a pay-as-you-go system. That is, the current payroll tax pays for current retirees. It’s not a fully-funded pension plan, where the money you pay into it goes into a fund that you draw from when you retire. Most of the money you pay into Social Security today goes to the people who are drawing out of it today. It’s a tax-supported benefit system.
The trust fund barely existed until 1983, when people realized there would be a problem when the baby boom generation started to retire. Congress passed an increase to the payroll tax and mandated that the surplus be put into the trust fund. The idea was that the size of the trust fund would increase until the boomers started to draw out of it, at which point it would start to decrease. This money in the trust fund is intended to keep the system going until the boomers die off. When this happens, the system can revert to the way it used to work, where the trust fund is small to non-existent.
In other words, the trust fund is supposed to run out of money. Congress might need to tweak it so that it doesn’t run out before the boomers are gone, but the fact that the fund will run out at some future date doesn’t mean the system will stop working.
Social Security does face some challenges. The ratio of workers to retirees is lower than it used to be, which means there are fewer people paying in for each person taking out. There are things we can do to alleviate this problem, such as raising the tax cap or raising the retirement age.
Just to clear up one thing, I wasn’t asking because I’m wondering if I can depend on SS for ALL my retirement needs. I recognize it as a supplement. I was asking because, ignoring SS, my current retirement plans would sustain me for only ten years post retirement, while if I add expected SS benefits in, this pushes things over the tipping point such that I can just live off the retirement interest plus SS. Was wondering, then, just how seriously to take this projection.
Raising my current retirement savings to a similar level would result in too little money to live from month to month right now, but once my wife has full-time employment again we can start turning things up as necessary. (When she does get full time employment our plan is not to raise our standard of living by that much but instead to use the extra income mostly for retirement, college, and vacation saving.)
This. It’ll exist in some form, but odds are the money won’t go very far by the time you get there. I certainly would not plan on it being my primary source of income.
The impending negative cash flow in the system, while being a “temporary” one until we boomers croak, may force some interesting decisions in federal budgeting during that time period. Can the government simply borrow the amount necessary to make up the difference or will it need to make the tough choices between things like having the largest military in the world versus basic retirement income for 80 million retirees (or whatever the number will be)?
The worldwide trend through history has been towards more social assistance programs. While the US is not as gung-ho on that idea as Europe, I think it would be silly to believe that we’re going to somehow fight the trends.
If there are any major changes, I think it will be safe to count on them being slowly implemented and implemented in a way that won’t seriously impact people who counted on it coming out one way or the other.
From a planning perspective, though… Social Security shouldn’t be seen as your primary retirement vehicle even if you think it’s guaranteed income. It just isn’t enough to do more than barely get by. If you want anything but Top Ramen and a room at your kids’ house, you need supplemental income, be that a pension, 401k, savings, etc.
So doing your retirement saving today based on the assumption that Social Security will go away could be a good idea. You’ll probably be wrong because Social Security probably won’t go away, but that just means you’ll have even more money at retirement.
Social Security is a program for old people. Old people are the most pandered-to demographic there is; they vote more than younger people and are very, very aware, as voters, of how much money the government is sending them.
You can never know for sure which horse will win the race, but there is no safer bet to come out ahead than old people programs. They would let almost any other program die before they risk losing the fogey vote.
Almost everybody is an old person or an old person-to-be.
I wonder what percentage cut of the defense budget would fund the SS deficit. It will be interesting to see how spending priorities change over the coming decades. We can already see some inklings of the debates ahead, as serious conversations are already starting about things like universal health care and even basic income guarantees.
I’m hard pressed to see a future U.S. where a baseline retirement income is rolled back.