We’ll Turn 67 In 2041, How Lucky For Us
My spouse received his social security statement in the mail yesterday. I opened it thinking it was mine, because I read somewhere that you received it around your birthday each year, and his isn’t for a while, but it was his. Which I realized as soon as I saw the income listed. It didn’t really matter though, because we share all of that information anyway. We sat down together to look at it, and I pointed out about how the longer you wait to receive benefits, the higher that monthly benefit is. If you start drawing benefits at 62, you receive a certain amount a month, but if you wait until 67 (his “full retirement age”) you receive a higher monthly amount. And if you wait all the way until 70, you receive an even higher monthly amount.
I started thinking about how many extra years you have to live to balance out the money you don’t get by drawing at 62 if you wait until 67 or 70 (a calculation I still have to figure out how to make past the basics to include inflation, interest, and other factors) as I scanned the rest of the document. A small fact about “social security’s future” seemed to jump off the page and hit me between the eyes. In 2017, according to the document, social security will start paying out more in benefits than they collect in taxes. And in 2041, without any changes to the current system, the Social Security Trust Fund will be exhausted and there will only be enough money to pay 75 cents for each dollar of scheduled benefits.
What is the Social Security Trust Fund, you ask? Basically, right now social security takes in more in taxes then it pays out in benefits, and the trust fund is where the excess resides. It actually doesn’t reside there from more than a bookkeeping standpoint because it then gets invested in government securities, but for all practical purposes one can think of it as the social security surplus. Which will begin to shrink in 2017, and will be gone by 2041, according to current projections.
2041 also happens to be the year both my spouse and I turn 67, our “full retirement age” according to social security. What fortuitous timing.
Now, does this information surprise me? No, not really. I am one of the people who “say” they aren’t expecting anything from social security when they retire. But it does depress me - not the lack of a retirement benefit as much as the fact that we pay money into it every year that I doubt we’ll ever see again. I guess the more I try and plug the holes in my own budget and the more I try to control all of our outflows, the more I notice the outflows I can’t do anything about. I don’t, of course, know that the depletion will hold true by the time we turn 67 - apparently the trust fund was almost depleted in 1982 and measures were enacted to restore it, but we’ll see. I’m not making any plans for the benefit we’re supposed to get at this point.
I wonder if Medicare will still exist when we turn 65.
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April 3rd, 2008 at 7:25 am
People think I’m joking when I say this, but I think the only answer is to emotionally blackmail the younger generations to pay more in.
As for potential actions, I wouldn’t be surprised if the age at which you can take social security increases, and/or the amount you can get decreases. A small positive amount is psychologically completely different to nothing.
April 3rd, 2008 at 8:09 am
Medicare is in worse shape the social security… It’s set to expire in 2019 I heard.
I’ll only be 56 in 2041, so the odds having anything left by the time I am 67, or even 62, are not good.
April 3rd, 2008 at 8:50 am
Like spilling buckets, I’ll be 56 in 2041. But I don’t think about social security much. I’m not really banking on them or on my parents to leave me anything (though that’s much more possible). Still, as you say, I’ve been paying into them ever since I got my first job and it’s kind of annoying to think that I might not even get my money back.
April 3rd, 2008 at 9:36 am
I think long before Medicare expires we’ll have nationalized health care of some form, so it will be made moot. As for Social Security, how exactly can young people be blackmailed to pay into a failing system? I’d rather give my parents money, and I will/have, for retirement than pay into a system that gets raided by overspending government.
April 3rd, 2008 at 9:45 am
I, for one, hope that we will have a more sustainable, and cheaper, national health care alternative to the poorly designed (and corporation pandered) Meicare. For one thing, our national healthcare cost is destroying our economy. But, then again, our current political leadership has abandoned thoughful policy for the “As long as they make money” aproach. It’s a Milton Friedman world and nothing else matters in the US at the moment.
April 3rd, 2008 at 11:11 am
I think it is silly to think that you will not get anything for your contributions to social security. That would only happen if the program were discontinued completely, which would make a lot of taxpayers unhappy.
The problem is that once there are less worker wages paying in than the projected benefits to be paid out, then benefits will have to be reduced to compensate. Nonetheless, there will in fact still be an amount of benefits being paid in by younger workers so you would still see *something* even if you don’t get your full value back in the end.
April 3rd, 2008 at 2:51 pm
I’d happily opt out now and give all that I’ve paid in and all of my future benefits away if I didn’t have to contribute any longer. Of course, that illustrates the broken system- the money was never invested wisely enough in the first place to preserve capital and pay out benefits and our continued payments are necessary just to keep up with current demand.
I think it is best to simply view money you pay to social security as a tax or fee and not as a benefit. If I get a buck or two back from the system some day, then great, but I’ve never actually considered it as part of my retirement planning.
April 3rd, 2008 at 3:13 pm
We have the same problem here in the UK. Unfortunately many western nations are suffering from the Demographic Timebomb (and ageing population) whilst nations like China and India continue to have a baby boom but what can we do? Like you I worry about if there wil actually be anything available from the state when we retire.
April 3rd, 2008 at 4:04 pm
Don’t believe all the doom and gloom you hear about social security. The estimates are very conservative and reality has always been better then the projections. In addition, the baby boomers will have fallen off or be falling off (dead) the roles by then.
April 3rd, 2008 at 9:51 pm
No money actually exists in Social Security Trust fund. It is just a number that represents how much more money the government has collected than it has paid out. The government has already spent the money. “Government Securities” is just a fancy way of saying that the government has loaned itself money. It is just like if a person loans himself/herself money. The money is gone and all the person has left is a worthless IOU to himself/herself. Plan for retirement as if social security wont be there.
April 3rd, 2008 at 11:24 pm
How ironic…I did the calculations awhile back too and I’m turning 65 in 2041. We’re doomed!
April 4th, 2008 at 2:59 pm
It is very frightening isn’t it? I hate the idea that I may have to sell my house to pay for my care when I get old. That is why I am intending on having a whole host of sources of passive income to aid me to having a very comfortable retirement.
April 4th, 2008 at 8:30 pm
Do you really think we won’t have universal health care by 2025? Outside of health care, you shouldn’t have too many costs in retirement. Doesn’t take too much to eat, and your house ought to be paid for by then. If there is Universal Healthcare, then getting .75 on the $ won’t be so bad.
April 8th, 2008 at 4:20 pm
Boy do I feel you on this. I’m 23 and in my first full-time job out of college. I’m on an entry-level salary not making a whole lot, and I’m financially independent. It kills me every month contributing several hundred dollars a month to Social Security when I’m pretty confident I’ll get no (or very little) return on it when I’m older. Like someone above said, now it’s more like a tax or fee than I benefit. I just hope there’s still a healthcare system for the elderly when I get there. I hate that I’m 23 and already shaking in my boots about retirement. Depressing.