Many people are disillusioned into thinking that Social Security will provide enough to pay all of their bills in retirement. Although Social Security is an important source of retirement income, it was never meant to be the sole source of income in
retirement. It is often said that a comfortable retirement is based on a
"three-legged stool" of Social Security, pensions and savings. American workers
should be saving for their retirement on a personal basis and through
employer-sponsored or other retirement plans.
What is the future of the Social Security program?
If Social Security is not changed, payroll taxes will have to be increased,
the benefits of today's younger workers will have to be cut, or massive
transfers from general revenues will be required. Social Security's Trustees
state, "If no action were taken until the combined trust funds become exhausted
in 2040, much larger changes would be required. For example, payroll taxes could
be raised to finance scheduled benefits fully in every year starting in 2040. In
this case, the payroll tax would be increased to 16.65 percent at the point of
trust fund exhaustion in 2040 and continue rising to 17.78 percent in 2080.
Similarly, benefits could be reduced to the level that is payable with scheduled
tax rates in every year beginning in 2040. Under this scenario, benefits would
be reduced 26 percent at the point of trust fund exhaustion in 2040, with
reductions reaching 30 percent in 2080.
See the 2006 Trustees Report
Does Social Security have dedicated assets invested for my retirement?
No. The taxes you pay for Social Security today, actually go to fund current retirees' benefits. Social Security is largely a "pay-as-you-go" system with today's taxpayers
paying for the benefits of today's retirees. Money not needed to pay today's
benefits is invested in special-issue Treasury bonds.
Source: Social Security Administration (www.socialsecurity.gov)
To learn about your
Retirement Savings Options (
IRA,
SEP,
Roth and more),
please
contact Atlantic
Financial
today.
