Should You Count On Social Security?
Don\'t rely solely'); document.write(' on Social Security for your retirement needs. It is an iffy proposition since the percentage of people 65 and older is '); document.write('increasing rapidly.
The Big Social Security Myth: It ensures that we’re financially “secure” in our later'); document.write(' years.
Fact: Its own financial future is in peril. In other words, don’t count on Social Security offeri'); document.write('ng the same financial security in 20 or 30 years as it does for today\'s retirees.
It’s hard to imagine surviving'); document.write(' retirement without the comfort of monthly Social Security checks arriving in the mail. Before 1935, Americans did exact'); document.write('ly that, however. It took the abject poverty of the elderly during the Great Depression to convince Congress to approve '); document.write('President Roosevelt\'s plan for basic subsistence payments to senior citizens.
The Salad Days Are Over
');
document.write('The program’s salad days started in 1972, when benefits were linked to the nation’s inflation rate, guaranteeing recipie');
document.write('nts that their monthly payments would rise with each year’s cost of living. The party’s over. The burden on working Amer');
document.write('icans grows each year. Payroll taxes siphon 6.2% of the first $90,000 a person earns in 2005-- an all-time high. ');
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It Cuts Both Ways
From a financial planning perspective, Social Security is');
document.write(' a double-edged sword. The program has a positive impact because it provides a basic level of retirement income. The fli');
document.write('p side is that Social Security engenders a false sense of security, lulling many people into thinking they do not need t');
document.write('o work very hard and sacrifice very much to save for retirement because those government checks will just keep rolling i');
document.write('n.
Times have changed since 1935, and for the worse. When Social Security was started, 16 workers were paying in'); document.write('to the system for every retiree receiving benefits. Now, only three workers contribute per retiree and by the year 2020 '); document.write('the ratio will be two to one -- two workers paying in for every retiree taking out. Even with several changes enacted in'); document.write(' recent years to address the shortfall, Social Security still can\'t provide the same level of benefits 20 years from now'); document.write(' that it does today.
Charting Your Own ‘Survival’ Route
What does this mean for your retirement planni');
document.write('ng? You should count on getting something, but "something" is not going to increase with inflation. Your retir');
document.write('ement benefits depend on the number of fiscal quarters (or three-month increments) you have worked, the amount of your a');
document.write('nnual income in each of the last 35 years of your working life, and your age at retirement.
The higher your earn'); document.write('ed income, the more your monthly benefits will be, although these increases are not proportional. For example, let’s ass'); document.write('ume that you are single and your lifetime income inched upward from year to year. If you received $30,000 during your la'); document.write('st year of work, your monthly benefits would start at somewhere around $1,100. But if you double your income to $60,000,'); document.write(' the benefits only increase about 15% to $1,250.
Benefits provide a minimum level of coverage, but don\'t expect '); document.write('to live on Social Security alone. The average monthly payment in 2004 was $1,050. Women are particularly vulnerable to low'); document.write('er benefits -- they often leave the work force for periods of time to raise children, and they generally received lower '); document.write('pay than men throughout their working lives.
Get A Social Security Statement
Regardless of your exact ');
document.write('future benefits, Social Security is still an important part of your retirement planning. The best way to start is by fin');
document.write('ding out your estimated benefits through the Social Security’s Internet request for a statement on its website. The Social Security Administration also ');
document.write('is now sending out annual updates of the statement, sent shortly after your birthday.
The report shows your esti'); document.write('mated annual benefits at age 62, at your "normal" retirement age (65 to 67, depending on your year of birth), '); document.write('and at age 70. These are estimates of future benefits, with an actual dollar amount at that time. If a projected benefit'); document.write(' is $1,500 a month at age 65, that may sound terrific to you now because you’re thinking of what $1,500 buys today.
'); document.write('Taking Steps To Protect Yourself
There are some important steps to take when you get your report. First, c');
document.write('heck your reported earnings for each year you worked. Just like any other bureaucracy, mistakes are made.
Second'); document.write(', take a good look at how your benefit varies according to your retirement age. If you retire at 62, generally you will '); document.write('only get 80% of your benefits at normal retirement age. Conversely, you will get an extra 8% for each year you work past'); document.write(' your normal retirement age. If you’re married, your non-working spouse will get 37.5% of your benefits if you retire ea'); document.write('rly and 50% at your normal retirement age.
Remember that the normal retirement age is no longer necessarily 65; '); document.write('as of the year 2000, it\'s begun to rise. Looking at your various retirement benefits, you can figure out the best time f'); document.write('or you to start taking Social Security.
Third, decide how much you want to rely on Social Security. The younger '); document.write('you are, the more likely it is that your benefits will be less than projected. As a safety measure, you might assume you'); document.write('r actual annual benefit would be 75% of current estimates. Whatever your method, plug that Social Security number into y'); document.write('our retirement needs analysis to see how much you will have to save on your own to provide the income you want. Then mak'); document.write('e a plan to save even more than that, if you can.
Don’t Pick Up That Phone
One final tip: When you dea');
document.write('l with the Social Security Administration, do it in writing. If doing so is impossible, go to a Social Security office. ');
document.write('Use the telephone as a last resort. Whether in person or by phone, take copious notes, and get the employee’s name and I');
document.write('D number with whom you are dealing.
You won’t be penalized if you receive incorrect information from the employe'); document.write('e and you have proof. If you are not happy with the Social Security Administration\'s decision about your situation, you '); document.write('can file a “reconsideration.” You can also ask to have any deadlines waived until your problems are resolved.
Social Security was never designed to pay for a life of luxury, but even with its current fiscal');
document.write(' woes, you can probably count on something when you retire.
There are several "rescue" plans on the ta'); document.write('ble now, allowing workers to invest some of their Social Security contributions themselves, allowing the federal governm'); document.write('ent to invest some of the programs\' billions in the stock market, and making other massive changes to the system. Whatev'); document.write('er the outcome, it’s clear that the days of guaranteed, steadily increasing benefits are over.
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