Social Security is a social insurance program paying a wide range of benefits covering eligible workers, spouses, widows and children. The most popular is the retirement benefit program, which pays inflated-adjusted income to eligible workers over their lifetimes based on their insured status, the cumulative amount of payroll taxes paid into the system and their age at time of benefit commencement.
Full retirement benefits are available to eligible taxpayers from ages 65 to 67; a reduced benefit is available beginning at age 62. On average, the cash benefit is designed to replace 40% of your taxable wages and income. Interesting history is that when the Social Security retirement program was established in 1937, the average U.S. life expectancy was only 67 yet full retirement age was still 65. Obviously, Social Security was never intended to become the primary source or retirement income for the average worker as it has today.
So there lies the planning challenge: Social Security faces an uncertain long-term future as U.S. life expectancy continues to grow and the ratio of taxpaying workers to retirees is diminishing. Benefit cuts, higher taxes, later benefit start dates, or a combination thereof, all present risk to the future role that Social Security benefits will play in a balanced retirement income plan. Finally, when you consider that the average annual return on the cumulative taxes paid into the system in the form of retirement benefits is only 2% per year, it is clear that Social Security cannot shoulder your retirement income needs by itself.
Wealthcare planning can help you put future Social Security retirement benefits into the proper perspective in your retirement plan and to look for alternative ways to fund your retirement savings goals.
