Scared About Social Security's Future? Take These Steps Now

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For millions of Americans, the idea of retirement without Social Security is unthinkable. According to the Social Security Administration, about 41 million retirees and dependents receive retirement benefits from Social Security, with disabled workers and their dependents making up nearly 11 million more recipients and 6.2 million survivors relying on Social Security benefits as well.

Yet with the $863 billion that the SSA anticipates paying out in benefits this year making up almost a quarter of federal spending , concerns about the long-term financial sustainability of Social Security have made many younger Americans nervous that they'll never see benefits at all.

Before you panic about the uncertainty over Social Security's future, though, it's important to take stock of the program's full condition. In addition, there are steps you can take to shore up your own financial situation to ensure that no matter what happens to Social Security, you'll be in the best position possible to take care of your own money needs in retirement.

Will Social Security Be There for You?

A recent survey from the Transamerica Center for Retirement Studies looked at attitudes among adults aged 18 to 35 about Social Security and other economic and political issues. More than 80 percent said they were concerned that Social Security was unlikely to be there for them by the time they retired. And two-thirds expect to get most of their retirement income not from Social Security but rather than their own savings and investments, either inside or outside of specific retirement-savings vehicles like individual retirement accounts and employer-sponsored 401(k) plans.

Of course, millennials have the benefit of one of the most valuable resources in investing: time. With 30 years or more before they expect to retire, millennials have the most flexibility in tailoring their finances to balance current financial needs and wishes against future money issues.

But even if you don't have that long a time horizon, you can still handle the uncertainty about Social Security.

1. Know the Worst-Case Scenarios

Despite the survey's revelations about our fears, the reality is that it's unlikely that Social Security will disappear entirely. Even once the Social Security Trust Fund runs out of money, which is currently projected to happen in 2034, ongoing payroll taxes are expected to provide the program with enough income to pay more than three-quarters of scheduled Social Security benefits.

So at this point, what many see as the potential worst-case Social Security scenario is that, then the Trust Fund is exhausted, benefits will have to be cut by around 25 percent to keep the program stable. A trim of that size to the average monthly benefit -- currently around $1,300 -- means you'll be losing about $350 of the monthly income you could have expected. You'll either need to replace that money with your own investments, or tighten your belt.

2. Get Smarter About Investing for Retirement

One of the most impressive findings of the Transamerica survey was the extent to which millennials are taking action sooner rather than later. An estimated 70 percent of millennials have already started saving for retirement, and they typically began saving at 22. More than 75 percent have discussed saving, investing and retirement planning with family members, friends and other respected peers. That's encouraging -- and a wise choice whatever your age.

Moreover, taking advantage of opportunities to save for retirement through work has become essential. The typical millennial contributes 10 percent of their annual pay to a 401(k) plan, taking full advantage of company matches and using vehicles like target-date funds or strategic allocation funds to get age-appropriate diversified exposure to a variety of different investments.

3. Keep Your Job Skills Competitive

One of the most discouraging aspects of the recent economic downturn was that high unemployment rates lasted for a long time even after the recovery began. More recently, job growth has started to pick up somewhat, and that has put Americans in better position to provide for their financial futures.

Nevertheless, it's more important than ever to remain valuable as a worker. For many who are close to retirement age, the best way to make sure their limited resources last through retirement is to work for a few extra years. But in today's sharply competitive labor market, getting the opportunity to stay in your job isn't a given. So for workers nearing retirement age, consistently demonstrating your value to your employer is essential if you are to remain employed as long as you choose. Somewhat younger workers have even more at stake to stay at the top of their game to reduce the chance of an early layoff, and looking at educational opportunities to bulk up your skills can be a smart way to protect against a drop in eventual Social Security retirement income.

Fixing Social Security's long-term financial woes will require either raising taxes, raising the retirement age, modifying how benefits are paid, or some combination of those -- none of which are politically feasible in the current environment, so repairs aren't likely to happen soon. Your best bet for getting financial security you desire is to take matters into your own hands by boosting your own savings and investing. That way, Social Security can be less of a necessity and more of a welcome supplement by the time you retire.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger. For more on ensuring a comfortable retirement for you and your family, see our free report in which Motley Fool retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule to boost your retirement income.

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James L. Holland

ATTN: Everyone out there
I am going to tell you how Social Security works.
The Government take's the money from Social Security
and give's Social Security low Interest Bonds.
Right now the Government has $50 Trillion Dollar
of Social Security Money that they cannot pay back
by 2034 Right now if the Government would stop
taking the money from Social Security it can go on for the next
100 Years. Jim Holland Jr. The World's Greatest Psychic

August 14 2014 at 11:40 AM Report abuse -1 rate up rate down Reply

Social security is easy to fix. The problem for the elder component is not formibable.It is a myth that those 76 million boomers born between 46 and 64 are living forever. The boomers are already dyding off rapidly, and given the rather terrible physical conditon of many younger boomers and genxers , and even Millenials they wil not see their 65th birthdays.
Even with that there are things to do to put SocSec on a sustainable path: (1) ncreasse the minimum wage by about three bucks an hour.This wold bring in an additonal 18 cents in FICA tax per hour worked, (2) Scrap the Cap of $117,000 and reduce the FICA rate by about a percetn for everybody (at least increase the cap if you cant bear to see the ultra rich pay into social security) and reforem social secuirty disabiltiy. some recipients can work and should nto be receiving medicare forever. If that is not enoght means test for those earngin over $500,00o or so n retirement. The Millenial Generation has been absolutely hoodwinked to believe that "social security will not be there for them. This is a ploy to get them to invest totally in Wall Street . Of course they shoud save what they can, Social secuirty provides for basic needs,not comforts. Getting rid of the social secuirty part of their future retirement is a disaster.

August 14 2014 at 10:05 AM Report abuse +2 rate up rate down Reply
1 reply to europlan's comment

So the social security trust is working with wall st. and lying about insolvency?

Much of what you wrote is straight up redistribution.

August 14 2014 at 11:31 AM Report abuse rate up rate down Reply

And of course Social Security could run out of money in the future. The sun could stop shining. The Mississippi river could dry up. And some of the trolls on here could actually get laid some day... There is only one absolute, and that is death.

Unless the people doing the calculating decide to factor in future contributions from workers and employers who match those contributions. Then Social Security will never run dry.... That is how Ponzi schemes are supposed to work. Which is why they will continue to raise minimum wage after the economic expansion plays out. The more money the poor make, the more they will pay into social security. Which is not refunded from the IRS like other FICA withholding is.

Man I feel like I am in a class with a bunch of 2nd graders that all have text books with the word Propaganda on the cover.

August 14 2014 at 3:26 AM Report abuse rate up rate down Reply
3 replies to socioeconomist1's comment
Joe The Economist

Worst case ?

According to the Trustees 2014 Report there is about a 50% chance that Social Security will pay scheduled benefits through 2032. In a less cooperative economy the system pays reduced benefits in 2027. Mind you the high-cost assumptions are not a worst case.

August 14 2014 at 1:23 AM Report abuse rate up rate down Reply
1 reply to Joe The Economist's comment

If you have ever read Alan Greenspan's book, "The Age of Turbulence"... In that book which was written in 2008, he says Social Security will be insolvent by 2020.... When HW Bush was elected to office, he said read my lips "No New Taxes" as well as "Social Security will be out of money by the year 2000".

Again, for the third time... The United States uses a system of fiat currency. Which is a faith based monetary system. The Federal Reserve buys bonds from the US Treasury for them to print up new money to inject into the float aka pay their bills. The Federal Reserve then uses the profits from those bonds to lend to private banks, who then lend that money to businesses and individuals for things like home loans and business loans. yada yada yada.... The money the Federal government is used by the department of energy to give out grants to companies like GE or colleges that are researching new energy sources like coal to liquid technology. The DOE even gave Tesla Motors a grant of $323 million dollars to develop electric cars in 2009. The Department of Transportation is given money to provide grants to states for road construction, purchasing new equipment, etc.. The Justice Department is given cash to run prisons and the courts. So and so on... All that money trickles down to employees and employees of contractors. The military pays companies like Lockhead Martin and Boeing to make new jet fighters.. and so on.

Now the Federal Reserve loans money to private and state banks to loan to regular people and small businesses. Some commercial loans as well. That money goes out to a person to buy a home, and the seller gets a ton of cash to buy a new home or spend.. or invest.. whatever.. That money from the Federal Reserve winds up in the stock markets, purchasing a municipal bond, to buy another home for a 3rd person to spend, but eventually the money gets spent somewhere along the line. A lawyer will get paid for filing the deed, the state will get paid a transaction fee for the deed transfer, and realtors might get commission too..

The money literally comes out of nowhere.. There is no digging up gold to make metal coins. It simple gets printed up and dispersed... over and over and over... Social Security will absolutely never be insolvent as long as the GDP continue to go through these business cycles. Business cycles last on average of 8 to 10 years. There will be 18 months of recession and then 6 to 8 years of expansion..

Feel free to type in "Business Cycle" into a google search and learn something... go ahead and learn about fiat currency while you are at it. After that, go ahead and type in state run retirement homes for people on welfare.

In case none of you haven't looked for it... There isn't thousands and thousands of old people dying under bridges. They get taken care of.. The government just doesn't want everyone figuring out that they do not need to serve in the military or work for pennies to get through life.

August 14 2014 at 3:17 AM Report abuse rate up rate down Reply
1 reply to socioeconomist1's comment
Joe The Economist

Thanks for the feedback I am sure that the Trustees will change their minds now. Why do we even pay them or the actuaries who calculate this stuff.

August 14 2014 at 9:28 AM Report abuse +1 rate up rate down

Scared About Social Security's Future? Seems we constantly hear about how Social Security is going to run out of money. How come we never hear about welfare running out of money? What's interesting is the first group "worked for" their money, but the second didn't.................

August 14 2014 at 12:48 AM Report abuse +2 rate up rate down Reply
2 replies to barryaclarke's comment
Joe The Economist

because one is a defined revenue stream and the other is an appropriated revenue stream. We have seen welfare programs cut recently in fact as part of the sequester. Social Security had no such problem.

So your question is a faulty comparison.

August 14 2014 at 1:25 AM Report abuse +1 rate up rate down Reply

barryaclarke.That is right . My wife and I are in or very late 60's and as of two months ago are now taking social security. Geners have gotten jobs and/or promtoions because we retired recetnly. Both of us started paying FICA tax in the very early 1960s. We pid the maximum perctn of 6.1 percetn of evey buck we ever earned for more than fifty years!!!!!!!!. Now we have to lsiten to degrading statements by bought off politians whos call socsec an "entitlement". It is not! We paif for it!

August 14 2014 at 10:12 AM Report abuse +1 rate up rate down Reply

During the last presidential debate, a question about SS was asked to both Obama and Romney. Neither seemed interested in answering the question.
Don't you think it would've been a perfect time for either candidate to tell the American public, Congress stole the SS TF?

If they stole all the money, how can benefits be paid out? And why didn't the article start out with, " The Reason SS is Broke, is Because Congress Stole the Funds."
At best, SS provided a cover for deficit spending. But the accountability of the TF, has never changed.

August 13 2014 at 10:46 PM Report abuse +1 rate up rate down Reply
2 replies to theycallmeroy3's comment

Both a Rep and Dem, sit on the board of the SS administration.

August 13 2014 at 10:57 PM Report abuse rate up rate down Reply
Joe The Economist

Because the 'raid' on Social Security is largely myth. The SSA puts the idea on its urban legends page. Raiding Social Security would require a massive conspiracy that would cross ideology, party, administrations, and thousands of SSA employees.

The reason that SS is broke is because the first 50 years of retirees underfunded the system. That is why it reached insolvency in 1983, and ended up paying its bills with money borrowed from the DI fund.

August 14 2014 at 1:29 AM Report abuse rate up rate down Reply

Hey folks? Would someone tell me how reduce taxes on SS retirement checks? What kind of taxes can we expect? State? Federal? at what rate?

August 13 2014 at 10:10 PM Report abuse -1 rate up rate down Reply
3 replies to fakeconomics01's comment

no points no monet.

August 13 2014 at 10:03 PM Report abuse rate up rate down Reply

What a surprise.... a real economist comes in here and explains how fiat currency works and it flies right over the heads of the political d-bags and trolls.

August 13 2014 at 9:40 PM Report abuse +1 rate up rate down Reply
2 replies to socioeconomist1's comment

Gee, I hope Congress is able to sell the Federal Reserve more bonds to fund the government in the future. I don't know though. The Republicrats might not be able to agree. That will leave mom and pop without hundreds of millions of people to fund social security in the future. Blau Blau Blau ....

August 13 2014 at 9:41 PM Report abuse rate up rate down Reply
1 reply to socioeconomist1's comment

You lost them at Greenspan. LOL

August 14 2014 at 7:06 AM Report abuse rate up rate down

Yeah, cuz no one else already knew how fiat currency works. I'm back to tell.what your enormous posts were about, because like I said earlier......skipped em.

If I hurt your feelings, it wasn't my intention....but please, get over yourself.

August 13 2014 at 10:06 PM Report abuse +1 rate up rate down Reply

It makes a lot of sense to talk about fixes for the long term health of Social Security and to act now to fix those problems and give everyone a sense of confidence for their retirement planning. Those fixes may include benefit cuts, tax increases, adjusting the age for receiving benefits, and more. Whatever is done should not be considered part of the current budget debates as Social Security has nothing to do with the current annual deficits. Those problems require their own set of fixes.

August 13 2014 at 8:19 PM Report abuse +2 rate up rate down Reply
1 reply to clark8642's comment

Clark --- Agree. But you have not mentioned about the fraud in SS Disability, Waste, and reducing the size of the SS administration as automation and streamline of the operations.

Raising the salary limits for SS tax from current $107K to $120K (or whatever the current limit is---may be that is what you mean increasing the tax?)

My question to you is--Were the SS funds misused previously for something other than SS? If so that money must be collected with interest.

August 13 2014 at 9:18 PM Report abuse rate up rate down Reply
1 reply to fakeconomics01's comment

Misused? Social Security surpluses, worth trillions, were built into the program by the 1983 changes to SS put in place by law (Greenspan Commission).These funds were borrowed by the government and are drawing interest just like government bonds you and I buy. Whether they were misused or not is a matter of opinion.

August 14 2014 at 6:24 AM Report abuse rate up rate down