Social Insecurity – Your Investment is No Retirement Plan

Ike IkokwuThe Blog

I just Googled “Social Security” and got 1.08 billion hits. Needless to say, it’s a hot topic. Without even clicking on those links, I know what most of them have in common.

It’s not good.

As most of us know, Social Security began as a measure to implement a “social insurance” of sorts during the Great Depression, when more than half of our seniors were living in poverty. Unfortunately, as with most government programs, it has become a mathematically unsustainable safety net that too many people have relabeled “retirement plan.”

My advice, at least for those of us still in the workforce, is this: If you’re planning on Social Security to be your main retirement income, don’t. It was never created for that purpose and the numbers simply don’t and won’t add up. In fact, if it were just another investment option, it would be regarded as the worst.

I can already hear people saying, “I’ve been paying FICA most of my life and that money is mine!”

Sure. Maybe. Some of it. Maybe.

Our parents and grandparents got a great return on their investment in Social Security — seven times more in benefits than they’d paid in, if they retired in 1960 and lived to 78 (men) or 81 (women.)

As recently as 1985, workers at every income level could retire and expect to get more in benefits than they paid in Social Security taxes.

Today, retirees are actually receiving less than they paid in, according to Urban Institute, a Washington think tank. And with the gargantuan baby boomer generation hitting retirement age this year, expect our beleaguered Social Security system to start crumbling at the knees.

Social Security’s trustees say the money will be gone – despite what comes out of our paychecks — in 2033. At that point, payroll taxes will provide enough revenue each year to pay about 75 percent of benefits.

Bottom line is this: When planning for retirement, it’s best to assume that you won’t get a dime of Social Security. You need a good backup if you hope to be eating more than cat food when you’re 85.

If, by some miracle, a solution to Social Security can be devised and the program still exists when you retire, then you can treat yourself to a nice night out for some people food.