The Future of Social Security
Social security probably won’t do it. The future of the Social Security system is unclear. But one thing is fairly certain. Your future Social Security retirement benefit will probably be much less than the amount of income you’ll need. The question is, how much less?
The average monthly Social Security benefit for retired workers receiving benefits in 2011 was approximately $1,182*—or $14,184 a year—before tax. Compare that amount to your current income. As our table shows, to maintain your current standard of living during retirement, you’re probably going to need quite a bit more money than Social Security provides.
Social Security is basically a “pay–as–you–go” program with today’s taxpayers paying the benefits of today’s retirees. In the future, fewer workers will be paying the benefits of more retirees. In 2011, there were 2.9 workers paying Social Security taxes for each Social Security beneficiary. By 2036, that ratio is projected to drop to 2.1 workers for every beneficiary.* Most likely, changes will be needed if the system is to be sustainable over the long term.
*Social Security Administration, 2011
Forge the Future
Counting on Social Security to provide you with a significant portion of your retirement income is a risky strategy. Your financial professional has tools available to help you set realistic retirement goals and figure out how much you need to invest toward potentially attaining those goals.
How Much of a Gap?
Source: Social Security Administration and NPI, 2011
*75 percent of pre-retirement income. According the U.S. Department of Labor, experts estimate retirees need about 70 percent of their pre-retirement income—lower earners, 90 percent or more—to maintain their standard of living.
Social Security benefits were calculated using the Social Security Administration’s online benefit calculator (www.ssa.gov) and assume the person retired in February 2011 at full retirement age.