Social Security Stress
Wealth is always in formation and the quality of the information you receive and act upon, determines your long-term success. Social security offers a basic level of income to all people covered by the program. During your working years, you pay taxes into the social security system and as a trade-off, you earn credits which determine estimated future benefits for yourself and possibly for your family members in the form of survivors' benefits.
As part of our planning process, we run retirement income projections with our clients, which include personal retirement savings, pension (if they have one), other sources of funds and of course, social security income. Periodically, I am asked not to include social security out of worry that the program will not exist down the road. How future benefits will be paid remains to be determined, as congress needs to address the projected shortfalls of the trust funds, which is simply the reserves of the system (like a savings account). However, it is highly unlikely that benefits will be reduced for the 75.3+ million1 people already receiving social security payments, or those who are nearing their age of eligibility. And, it would be nearly impossible for the system to cease to exist. In fact, we consider social security to be among the strongest of guaranteed retirement income sources, as it is funded by the taxing authority of the United States government, which is granted by United States Constitution.
Notice the term “credits” from the first paragraph. That means that there is not a social security account that is managed for your future benefit, like your 401(k) or even a pension that has the potential to be mismanaged into future failure. Rather, your social security credits determine the benefit you are entitled to, which will be collected from other workers in the future, paying into the system. Nearly as quickly as social security taxes are collected from your paycheck, they are paid out to a beneficiary receiving social security retirement, survivors or disability income.
The bottom line is, as long as there are workers to pay into the system, social security benefit payments will be there, in some way, shape or form. Often times, hearing this fundamental function of the system helps alleviate some people’s social security stress.
