Can You Count on Social Security?

In many people's minds, a cloud of uncertainty hovers over Social Security. But the situation isn't as dire as some may fear, experts say.

Funds will not run dry. Workers and employers will continue to pay in, so money will be there to pay benefits. But eventually we'll see a shortfall that will provide only a portion of scheduled benefits.

The reason for the shortfall is shifting demographics. Baby boomers are moving into retirement, the average lifespan is expanding, and low birth rates mean the number of younger workers who pay into Social Security will continue to decrease. Consider that in 1950, there were 16.5 workers for each Social Security beneficiary. Today that ratio is 3.3 to 1, and in 40 years it will be 2 to 1.

Discussions about what lies ahead for Social Security invariably focus on two dates: 2017 and 2041. In 2017, benefit payments will begin to exceed Social Security tax revenues, according to projections by the Social Security Board of Trustees in its 2007 annual report.

Thus, in 2017, benefit payments will have to start coming out of the Social Security Trust Fund, a reserve that exists now because more money has been coming in than going out.

But in 2041, those reserves will be exhausted, trustees predict. Then the Social Security tax revenues coming in will be enough to pay 75% of promised benefits. After that, the benefit level gradually will fall to 70% by 2081.

That's if the government does nothing. Experts agree that relatively modest changes now could ensure Social Security's solvency for decades. The longer we wait, the more drastic the changes will have to be.

Projections about Social Security's future are just that--projections, not certainties. Many factors will affect how much your benefits will be when you reach 70 or 80 or 90. Your best bet is to save on your own to complement whatever the government will give you.

Harvard University Credit Union can help with all your retirement needs. Visit us today and talk to our retirement planning specialists.