The Future of Social Security and Scheduled Benefits

Should I count on Social Security for all my retirement income?

No. Social Security 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 will happen if Social Security is not changed?

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.”

I'm 35 years old. If nothing is done to improve Social Security, what can I expect to receive in retirement benefits from the program?

Unless changes are made, at age 69 in 2040 your scheduled benefits could be reduced by 26 percent and could continue to be reduced every year thereafter from presently scheduled levels. See the 2006 Trustees Report

Does Social Security have dedicated assets invested for my retirement?

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)