It wouldn’t be entirely truthful to say that, yes, you’ll be able to count on Social Security as a form of retirement pension in the future. However, that doesn’t mean that it won’t be around; the trouble with giving a straightforward answer is that, while Social Security isn’t likely to disappear, it’s in an unfavorable state right now and will need a change very soon.
What Happened to Social Security?
When it was established in 1935, Social Security was a definitive answer to the federal responsibility of elderly care. It counted on contributions made by hardworking Americans from their paychecks into the Social Security system. The period from the beginning of your working life to your retirement was long enough that federal money handlers could invest the money and turn it into larger sums for improving government programs.
It was a win-win for most workers; everyone pays a small fee, then everyone who paid in gets a guaranteed paycheck later on, post-retirement. But Americans tend to condemn withholdings from their paychecks, and over time, the payouts for Social Security started to outpace the contributions.
Since 2010, the cash flow from Social Security has been entirely negative. The interest earned on Social Security over the course of its life has allowed for a bit of cushion should cash flow become negative, but that still only offers a temporary fix. Congress will have to either increase taxes or lower payouts for Social Security, which would also cause hardships based on the ever-increasing cost of living.
What Can I Expect When I Retire?
Because low taxes are so favorable in the opinion of most Americans, it’s most likely that Social Security payouts will have to decrease to keep the program afloat. That means you’ll have to estimate a lower monthly payment in your post-retirement account when calculating how you will handle retirement expenses and bills.
Is There Help Available?
Before Social Security, the burden of post-retirement financial care fell to states, cities, or in many cases, families. To ensure absolute financial security, it’s imperative to make smart and lucrative investments as you lead up to retirement (and well before it, if possible.)
Explore post-retirement income options that don’t require you to continue working if you would like to enjoy retirement without relying on a paycheck. Options such as whole life insurance, 401ks, and mutual funds are classic favorite ways to invest, but it’s important to speak with financial professionals with experience dealing in retirement planning before deciding.
Americans for Life offers guidance for men and women seeking reliable sources of retirement income as well as insurance policies that will fully cover family in the event of the unexpected. Learn more about what we do to help smart financial thinkers every day.