Why You Shouldn’t Bank on Social Security Retirement Benefits

social security benefits

Social Security is at risk of running dry at some point in the future — a point that once seemed distant and not quite real to many young workers. Unfortunately, for the children and grandchildren of baby boomers, that day is now fast approaching.

It was once predicted that the fund that holds Social Security benefits for workers with disabilities would be depleted by 2024. However, experts now project that the Social Security trust fund will run out of money by 2017, with retirement benefits soon to follow in 2036. When that happens, the government will no longer be able to pay full benefits to seniors.

So how are today’s workers supposed to plan for retirement knowing they won’t be able to rely on SSI?

How Could Social Security Run Out of Money?

You must be wondering how it’s possible for a fund that every American worker pays into to run out of money before those same workers even reach retirement. There are actually several major causes of this problem.

Increased Life Expectancy

People are living longer, which means today’s retirees are enjoying a post-employment life that extends several years beyond the average from 40 years ago. That means they also require more money to live off than was paid into the system during their employment.

social security

Rising Health Costs

Since retirees are sticking around longer, they’re also requiring more medical treatment — and the price tag on health care in the country is going up at the same time. According to a survey by the Kaiser Family Foundation, the average annual premium for a family increased to $16,351 last year, a 4 percent rise over the previous year. Combine the steady climb in health care expenses with the increased number of years seniors are expected to live, and the cost of living for retired workers grows exponentially.


With fewer people in the workforce, fewer taxes are collected — and as disabled workers struggle to find new jobs in a period of high unemployment, the Social Security system is strained beyond what it was built to handle. In 2011, the Associated Press reported that approximately 3.3 million people applied for federal disability benefits, 1 million more than the previous decade.

Related: Are You Unemployed? Why Bankruptcy Might Make Job Searching Harder

Mistakes in Payouts

When an agency is as gigantic as the Social Security Administration, there are bound to be errors that slip through the cracks. One such mistake: Social Security issues millions in benefits to deceased beneficiaries.

What Will Happen to Social Security Benefits?

It isn’t all doom and gloom for soon-to-be retirees. When the fund runs out, retired workers will still get some of their social security benefits. In fact, they’ll get a majority of their benefits — just not the full payout current retirees enjoy.

According to BusinessWeek.com, Social Security payments would need to be reduced by 23 percent when the trust fund runs dry. The remaining benefits would be funded by payroll taxes. That’s the plan, anyway.

Saving for Retirement Without SSI

Social Security, as a whole, is likely not going anywhere. Just to be safe, however, it’s probably best not to count on having much Social Security income (SSI) to pad your retirement savings. Here are a few tips to maximize your retirement savings and income:

  • Start saving early: It’s the younger workers who should be most concerned about the future of Social Security, but they’re also the ones in the best position to rise above the problem. The earlier you begin saving and investing, the more aggressive you can be; that means you not only save more, but earn more interest. Even 20 dollars a month is better than zero.
  • Don’t give in to lifestyle inflation: It’s easy for young, career-oriented employees to quickly increase their spending as they climb the rungs of the corporate ladder. Lifestyle inflation is fun while you’re working, but keep in mind you have to keep up your financial obligations without that fat paycheck someday. A common estimate for the amount you’ll need to support a comfortable retirement lifestyle is 80 percent of your current annual income per year.
  • Delay benefits: Though you’re entitled to begin collecting benefits at full retirement age (67 if you were born after 1959), waiting to collect your benefits will entitle you to a larger check. In fact, you will receive an 8 percent increase for every year you delay benefits until you reach age 70, at which point benefits max out at their full potential.

In all likelihood, there’s no Social Security crisis now and there isn’t going to be later. Even if (or when) the Social Security trust fund empties, current taxes will account for a majority of the beneficiary payouts.

Social Security isn’t going to be what it is today, but it’s not going to disappear either.

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  • A major problem is that the SS Trust Fund is made up of IOU’s. The money was spent as it came in. When the politicians tell is that the retirement fund will last ‘X’ number if years, they are counting the IOU’s that must be paid out of general tax revenues. SS is BROKE!

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  • RePeter

    It’s scary for young people — they are saddled with mountains of student loans, have difficulty finding a job, and are getting lower and lower starting salaries. And then they could be expected to fund their retirement almost 100% themselves, all while part of their paychecks go to subsidize the lives of current retirees. It’ll be interesting to see what SS becomes — hopefully this new generation will be financially wiser.

    • Dennis

      Hopefully they’ll vote wiser, and demand the government thieves put back into the system, the money they STOLE !!!

  • Defgasman

    One change in SS that would extend it’s life would if the CAP was remover. Most workers today never reach the CAP which is $119,000 for 2014. Only the top 10% ever reach the CAP anymore so the bottom 90% is paying SS taxes on all their income. The ones making $250 K are not even paying it on half their income and the few making $1 MILLION is paying SS TAXES about 12% of their income. The people making the most are paying the lowest precentage rates on their income. The fairest way would be if ALL workers did not have to pay SS taxes on the first $25,000 of earned income and then had to pay SS taxes on EVERYTHING over $25,000.

    This would add more money to SS and allow the lower wage earners more of a chance to save towards their retirements.

    • mack

      Your “fairest” way is entirely unfair. You are saying that people that make more should pay more then they can ever get out. While others shouldn’t have to put anything in but get to take just as much out. Please explain how that is fair. I suppose you live in the Obama Utopia that those that work hard to succeed should be punished and pay for those that don’t… “affordable healthcare”… working class paying for those that can’t.

      Instead of making more laws, why don’t we just fix the real problem… Fix the economy, fix this crooked government (both sides) lower taxes and people will be able to save more.

      SS has always been a scam. If we were to invest that money ourselves and not pay the taxes THE MONEY WOULD BE THERE. Instead we give it to a crooked government to take care of and all you can talk about is who should pay more. Fix the government (be dependent on yourself) fix the problems.

  • DannyBoy

    The article conclusion that there is no SSI crisis and there won’t be one either, hardly supports it’s title of Don’t Bank on Social Security. Wouldn’t it have been more honest and helpful Mr. Bond, to title your message Bank on SSI being there for you?

    • mack

      I concur. Sounds like he got chastised or simply lost his balls right before he published. SS itself says the funds will be “exhausted”. And the makeup of the causes listed aren’t going to change.

  • Harry

    Whether Social Security benefits will be available or not you should work at developing mutiple streams of income once retired. The key is to start saving/investing early in life and be consistent (save with every paycheck). Taking advantage of a matching 401k plan should be a no brainer. The power of compounding is lost on many people. Also maxing out contributions when possible, eliminating debt, avoiding risks with your nest egg, planning for multiple streams of income once retired (social security, pensions, dividends, part time work, etc.) and making catch up contributions once you reach 50 should all be part of everyone’s plan.. I recently found the site Retirement And Good Living which provides information on all these issues as well as finances, health, retirement locations, part time work and also has a great blog of guest posts about a variety of retirement topics.