Updated on 10.04.10

Don’t Rely on Social Security

Trent Hamm

This is a message to all of those people under, say, forty out there.

Don’t rely on Social Security for any part of your retirement. When you’re thinking about retirement, assume that you’re going to be paying your own way.

That’s not a statement that a lot of people like to think about, but the data pretty much points to this as an inevitability. Let me explain why.

Take a look at the birth rate by year in the United States. During the years when the “baby boomers” were arriving on the scene (the early 1950s, for example), you saw a birth rate of 25 babies per 1,000 people in the population. By the 1970s, this birth rate had dropped to 15 babies per 1,000 people in the population and never really recovered. In fact, the current birth rate is the lowest it’s ever been – 13.5 babies per 1,000 people.

To put it another way, the age of the average American is rising. According to this data, the average American is about 0.2 years older each year and is currently 36.7 years old.

With the population getting older and with fewer babies being born, you have more people reaching retirement age with less people entering the workforce. That means more people are moving to the point of taking money out of Social Security and fewer people are joining the workforce to pay into Social Security.

What happens to any pool of money if you suddenly start paying out more than you’re paying in? It dries up. The sheer numbers say that’s what’s going to happen to Social Security.

Well, why can’t something change? The problem with touching Social Security in its current form is that it’s a political nightmare. Politicians are afraid to touch the issue because people who are retired and receiving Social Security benefits are also the people who often have the most time to vote and to get involved in political causes.

There aren’t very many ways that this problem can be solved. The most likely solution will be to simply raise the benefits age for Social Security – and raise it again – and raise it again. What that would mean is that by the time we retire, we’ll have to be very, very old before we see Social Security money.

What that means is that unless we want to work until we’re in our eighties, we’d better start planning for our own retirement now, not later.

Even if this doesn’t come to pass and a great new solution somehow solves the Social Security problem, saving for your own retirement is still incredibly beneficial, because it allows you to have financial means in retirement that go far beyond the small Social Security benefits.

What can you do? It’s simple. Start saving for retirement now, whether you’re 22 or 35. The earlier you start, the better off you are.

If you have a 401(k) plan at work, that’s usually a good place to start. If your employer matches your contributions, that’s even better. Don’t worry about not knowing anything about investing – it’s far more important to start contributing than to find the “perfect” investment. Head over to your benefits office and get this set up today.

If you don’t have a 401(k) (or a 403(b) or something similar) at work, you can do it yourself by setting up a Roth IRA. It’s really easy to do – just open an account at an investment house (I use Vanguard) and set up an automatic contribution out of your checking account.

Think of it as a little thing you can do right now to help your future self a lot when he or she is in their sixties. Giving up a magazine subscription or something else small now can give you the freedom to control your own destiny when you’re older. That’s a great trade if you ask me.

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  1. Julie says:

    I agree that taking charge of one’s own destiny for retirement is a smart thing to do. But isn’t there something besides a plain old savings account (i.e., zero interest) that isn’t tied to the stock market? Or treasuries? (not enough lump sum money to buy one). We have a 401(K) and an IRA, but it is a numbing experience watching them tank and lose half their value basically overnight (as was the case for many of us in the last year or so).

  2. Shaun says:

    Depending on how long until you plan to use this money, losing value like that should not concern you. I know its tough to think like that, but a long term view is required to invest in one’s retirement.

  3. Dawn says:

    All the more reason to allow more immigrants into the US, More people to have babies and support the older ones.

  4. George says:

    @Julie – if you owned individual stocks in your 401k and they were dividend payers, then you likely had a stable income from it.

    On the other hand, if you rely on capital gains in the 401k to meet income needs, then you suffered badly.

  5. George says:

    Save enough to become a capitalist and q

  6. George says:

    Save early and often enough to become a capitalist and quit paying the 6+% to SSI.

  7. E.D. says:

    I completely agree – if you are under 40 and expecting SS money under the current rules, you are dreaming.

    The quickest fix would be to remove the cap on the SS tax. Unfortunately, that probably won’t happen. Even increasing it to the first million in income would help.

  8. Des says:

    RE: George – Actually it’s over 12%, half of it is hidden from the taxpayer by saying its being paid by the employer.

  9. George says:

    @Des – agreed, but it’s in the employee’s interest to save enough to not pay it any more.

  10. Briana @ GBR says:

    We had this conversation in my history class (almost 4 years ago). Social security is definitely going to be gone by the time I retire (I turn 20 in a week) so I’ve decided to do the best I can when it comes to saving for retirement on my own. I wish I had some extra cushion that my grandparents have, but it just motivates me to save even more.

  11. leslie says:

    Well, I am over 40 (barely, but still over)and I have never planned on having Social Security around. My intention is to fund my retirement myself and then maybe be pleasantly surprised by having social security too. Or, maybe not having it but not be eating cat food for dinner because I never really planned to have that money anyway.

  12. It is astonishing that not a single economist in the White House of the 1930s explained to FDR that the system was eventually going to become untenable. We’ve finally reached the tipping point, and it took barely three generations. Obama will be the last president with the option of kicking the can down to his successor. Hopefully by then, people will no longer buy the implicit message of “Citizen, you’re too stupid to save for your retirement. Let your government betters take care of it for you instead. You don’t have to do a thing.”

  13. valleycat1 says:

    Social Security was not intended to finance anyone’s full retirement – it was set up as a gap program to provide a guaranteed minimal income to seniors – to be sure that people had at least something toward their retirement needs. The fact that so many people came to rely on it in such a short time as their only retirement fund says something to me about the effectiveness of leaving retirement savings only to the individual.

  14. DougR says:

    Excuse me, everyone,but you’re ALL wrong about the state of Social Security. The program is fully funded through at least 2037, and can be tweaked (by, for example, raising the FICA tax slightly) to keep it in-funds for longer.

    All the so-called “commonsense” arguments about ‘if you pay out more than you pay it’ blah blah blah don’t apply here, because of the unique way Social Security is funded.

    What really troubles me about all these comments (leaving aside the question of whether to rely on SocSec for retirement planning) is that so many commenters A) don’t understand Social Security funding and B) will let anti-tax “crusaders” cut a perfectly viable program to shreds (lots of people don’t like Social Security BECAUSE it’s a government program that really works) simply because they don’t know that the “problems” described here are fiction/propaganda.

    Please look into this a little deeper, folks. The program is fine.

  15. DougR says:

    sorry, that should be ‘if you pay out more than you pay IN’

  16. lurker carl says:

    When first implemented, the average life span was 60 years but the benefit didn’t start until age 62. The plan would have been self perpetuating if life span did not increase because fewer than half the population would have lived long enough to receive benefits.

    Social Security is a mandatory government sponsored insurance policy, not a retirement plan. It was designed to suppliment whatever income you managed to retain into your declining years.

    SSI will not vanish; benefits will be reduced, available at a later age than currently and payroll deductions increased. That is what has been done over the years already to keep the plan solvent to this point in time.

  17. Chris says:

    As a railroad employee I don’t participate in Social Security. Our railroad retirement plan is separate from Social Security (but similar). I just hope when I retire in 30 years it’s still separate and the government does not roll our benefits into Social Security.

  18. mary m says:

    well I am 42 and I am going to be peeved if a fund I have paid into since I was 16 years old is gone when I retire. I could have invested that 6.2% myself and been in great shape.

  19. chacha1 says:

    Thank you DougR, lurkercarl, and Dawn. There is simply no chance that the U.S. workforce is going to all get old and retire simultaneously, and if the SS plan needs to be amended – as it should be – so that benefits are payable later in life in order to keep the program going, that is what will be done. Our nation has never yet taken away a benefit once granted. Our governments will do what they must to keep the program functioning in some form.

    That said, for pete’s sake, plan ahead and save for yourself as well. The amount any of us pays in to Social Security is nowhere near the amount of money we end up getting back, and nowhere near the amount we should be putting away on our own.

  20. prodgod says:

    That’s all well and good, but being self-employed, I’m forced to pay 12.4% of my income toward benefits that you predict I’ll never reap? Sad thing is, that prevents me from being able to really save much for retirement, so I’ll pretty much be depending on SS to live on.

    I fully realize that being self-employed is my choice, but it’s unfortunate that paying into SS isn’t also my choice.

  21. valleycat1 says:

    what Lurker Carl said (#16)

  22. jim says:

    DougR is right. Assuming that social security will pay out “nothing” by the time you retire is not realistic.

    Worst case they’ll eventually have to raise the tax rate (like they’ve done 20 times already in the past 75 years), lower benefits for some (which they’ve done before), increase taxes on benefits and/or raise the retirement age (also done that). If nothing else they project they’ll be able to pay around 75% of current benefit levels through 2084 even with no other changes. So if they change nothing at all they can still pay out 75% of the benefits.

  23. Ian says:


    Didn’t you read that Motley Fool article on SS not really running out? If no changes are made I can expect 70% of my SS benefit. Likely, changes will be made.

    Since saving for retirement is such a rarity for the average American, do you really think the federal government will let the MAJORITY of seniors live in poverty and homelessness? It would be an epidemic.

    I fully fund my 401k and put $2-400 away per month into my IRA. This, according to the EXPERTs, is not enough to retire at 65 without SS. With SS, I’m fine.

    I need to put away $833/month above my 401k to be able to retire at 65. What average Americans can afford to do this?

    If the experts are right all this means to me is that I will never be able to retire. I will work until I am let go and have to get a job as a greeter at Walmart until I die. Whatever! Ha.

    I think we’ll be fine.

    Cheers, Ian

  24. STL Mom says:

    22% of American children are now living in poverty. What are the chances that this generation will make enough money as adults to support me in my retirement? Will I get subsidized health care and drug benefits, like the ones my parents now enjoy? I doubt it — demographics are not on my side. I don’t think my children’s generation will be willing to pay enough taxes to fund my retirement plus paying off government debt ran up before they were voting age.
    Even if you disagree about the details of Social Security funding, it’s still good advice to save as much money as you can for an uncertain future.

  25. Bill says:

    My wife and I would like to have 4 kids. Maybe one of them can support us :)

  26. Paul says:

    I don’t suppose I can count on not paying into social security until I retire? Didn’t think so. Well, I’ll be damned if I’m going to be in the generation that gets to foot the bill for the excesses of the previous one. Full benefits at 65 or say good-bye to your jobs, Congress!

  27. Piggy Bank says:

    I agree with Trent that relying on social security for financial security for retirement is a terrible idea. Social Security is a flawed system, and will continue to have issues over time. However I do not believe that it will fail completely. It would be political suicide to let the system fail, and no political party would let it happen.

    Lucky for us, spending less than we earn. Living modestly and wise investing can provide financial freedom in the years to come.

  28. Joe says:

    Expect the government to punish you for your foresight and planning. Those of us who scrimp and save for retirement while the neighbors buy fancy stuff and take exotic vacations will be means tested when it comes time to collect. Heck if things get bad, they’ll probably dip into your IRAs no matter what is promised today.

  29. DougR says:

    Although Trent’s assumptions are wrong about the continued existence of SS, I totally agree with the main point of the post: I expect to start collecting Social Security in a year or so, having paid into it for all of my working life–but BECAUSE I didn’t take Trent’s advice in my 20s and 30s, where most of you guys are now, I’ll have to keep working anyway, because SS isn’t (and shouldn’t be regarded as) sufficient to live on–at least not in MY urban area.

    As to whether politicians start messing up a perfectly running program so that it no longer exists when it’s time for you to retire, guess what–that’s up to YOU guys and who YOU decide to vote for! Fer pete’s sake, that’s why we have elections in this country.

    Anyone who wants to learn the factual side of all this scare-mongering about Social Security can find it here (and many other places too)

  30. BD says:

    I’m pretty pessimistic. I figured long ago that social security would be gone by the time I retired. Stuff like that just seems to happen to me, heh.

    Trouble is, I make very little, so my savings is little. I just plan on never retiring. :/

  31. ParisianThinker says:

    I have saved for my retirement. So what is the result?
    All the interest I was to receive is being given to the bankers who planned to scam the taxpayers. This is how our system works!
    All of us know the banks which hold our money are insolvent. The dollar’s purchasing power is worth less today than it was 35 years ago.
    In addition, Obama has plans to confiscate your IRA and 401(K) plans when no one else wants to buy our bonds.
    This is all a joke. There is no future in the USA. Now the billions own you and think genocide is the answer.

  32. Ya know, I’ve heard this from all over the place and I’m not saying that I disagree.

    But I’ve also heard that Social Security is not THAT broken, and although it may be in a different form and may not be as much, it will certainly still be there.

    Would I rely on it? Of course not.

  33. Not Plain Jane says:

    Unfortunately, too many Americans have grown accustomed to a lifestyle that they cannot afford….in their working life….then expect to afford it when they retire?

    Saving for retirement has been traded for paying off debt, that is why folks say they “can’t afford to fund retirement”.

    Living simply and within one’s means, valuing each other not things, escaping the pitfalls of greed. This is what will change our country.

  34. Carey says:

    DougR, THANK YOU.

    So many people, including you, Trent, don’t get Social Security. Stop listening to the fear-mongering on the news and actually educate yourselves about how Social Security works.

    It’s good advice to leave Social Security out of your own retirement planning, but to say that it won’t be there at all when you retire is just repeating the same hot air they spew on TV.

    Like DougR said, Social Security works. It’s fully funded through 2037, and will pay 75% of benefits after that if we do nothing. I can not conceive of a congress that would commit political suicide by doing nothing – they always operate in the interest of getting themselves re-elected, so they won’t let it happen.

    Simply removing the cap on taxable income would keep the program solvent into the 2080s (which is as far as they project anyway). FICA taxes are the only taxes in this country that are explicitly regressive, and it’s time we changed that.

  35. getagrip says:

    Since when were people supposed to “depend” on social security for their retirement. To me that is the “flaw” of the system. At best it was meant as a safety net to keep you from starving in your old age and as a possible supplement to what you had arranged for yourself. Sadly folks started thinking that it was all they would need for retirement and stopped planning and saving to take care of themselves.

    Also, if you raise the cap on Social Security earnings (e.g. taxable income) you’d better raise the cap on payouts or all you’re doing is adding a flat tax to people above a certain income.

    Isn’t it interesting that we are willing to screw the very people who’s incomes we aspire to have one day?

  36. HonestB says:

    I wouldn’t rely on Social Security being around because there are a lot of politicians who are intent on killing it. But the survival of Social Security isn’t a financial question at all. It’s a political one.

    A lot of the history people are talking about in this thread is based on false assumptions. Most people didn’t save for their own retirement before social security – they might have wanted to, but, much like most people now, they lacked the means. They expected younger people in their families to take care of them, and generally that’s what happened, but the truth is a lot of elderly people in that era fell through the cracks into extreme poverty.

  37. Courtney20 says:

    @ HonsetB – you’re right. Social Security is a political issue. And the AARP is one of the most powerful lobbyist groups in the country. Social Security is almost guaranteed to change in the future, so we don’t count it in our personal retirement calculations. But to say that it won’t be there at all, in any form in the future is ludicrous.

  38. v says:

    another point to consider: SS is not a funded trust. The gov’t considers all payments to SS “income” and uses the money as general revenue. There’s no fund out there with my name on it that I get back at retirement age. SS is based on income earned by the individual in the last 10 (is that right? 10?) years of contributing to SS, so all those years of paying in your teens, twenties, thirties, forties and fifties has NOTHING to do with what you would draw out.

    I’m not going to count on any money from my gov’t for retirement. It’s not “there” now, and there are no guarantees that the gov’t will still be supporting us when we’re in our 70s. Expect the worst and you may occasionally be pleasantly surprised.

  39. Norman says:

    I keep teasing my son, who is 21 and in college, that he is my retirement plan. We laugh about it…nervously. Actually, I do believe SS will be around when I’m ready, but I’ve always thought of it as a supplement to what I’ve saved for retirement. What I don’t understand is why they started adding other people into SS benefits. For example, true story, I know a widow with 3 children where she and all three kids got SS til they were out of college and she still gets it as long as she does not remarry. I am sorry that their father died, but they were able to live off SS and never had to work for over 20 years and counting. I understand providing for the children but it seems like the benefit should not have been paid to her until she was of retirement age. I thought it was a retirement plan? When did it become a welfare plan instead? She also got a huge settlement and life insurance so its not like they even needed it. Before I get hate, I understand that we should take care of widows and orphans, but isn’t that going a bit overboard with funds that were intended for people that paid tax all their working lives and need it for retirement?

  40. Jason says:

    Could someone who has claimed that social security is “fully funded” through 2037, please explain what “fully funded” means?

  41. Oleg Kolomatskiy says:

    There is a certain sense in its article, because retirement is something that’s inevitable and as far as politicsdoesn’t contribute something back to people, they have to put off at least 10% percent of their income! That will be enough to invest it later and provide for theis future retirement beforehand!
    Thanks for posting it!

  42. Golfing Girl says:

    With the Hispanic population boom and current Hispanic birthrate of approximately 23, I don’t think this is going to be an issue, at least if they are all naturalized citizens who someday pay into the system.

  43. Rhiannon says:

    Sorry, I think that Robert Brokamp’s guest post on this topic on Get Rich Slowly last month was far better and more informed than this one. We may not get as much, and we may get benefits at a later age, but I do believe we’ll get it.

    Check out that post here: http://www.getrichslowly.org/blog/2010/09/01/yes-you-will-get-social-security/

  44. Mule Skinner says:

    @Golfing Girl — If you work at an aboveboard job you pay in whether you’re a citizen or not. People without proper documents may never get the benefits, however.

    I agree with you about the Hispanic immigration boom and birthrate. This is going to be good for us.

  45. ted says:

    A few things-

    Immigration reform will likely be a net cost to the SS system. If you legalize those who are currently paying into the system (some are due to fake SS cards) then you will eventually have to pay them benefits. More importantly,legal Hispanic immigrants tend to be lower-income, and due to the progressive nature of SS benefits, will see higher relative benefit than higher-income individuals.

    Second, you can’t just tweak the taxable maximum and expect to make the program fully solvent. Even if you totally remove the taxable maximum, what you do is push back cash deficits in the system until 2023. While it does ‘solve’ SS on a 75-year actuarial basis, it does not solve it over time, because each year you move forward, one year of surpluses will drop out of the measuring period and one year of deficits will enter into the measuring period. Basically it gives Congress a big new pot of money to spend, without any mechanism to save the additional funds — putting us in the exact same situation we are in now in about a decade without fundamentally fixing the problem.

    Last, it is important, as some have, to note that SS will be there in some form in the future. In 2037 benefits by law will have to be cut by 22% so that the income rates and cost rates equal each other. However, it is also important to note that this isn’t some far off date. If you’re 55 today, SS projects that your life expectancy will be 83. That means you will be 82 when your benefits are cut by about $4000 per year. Even some currently on SS could see their benefits cuts if they are especially long lived (if you’re 62 today, and make it to 89 — congrats!). The old-old are those most reliant on SS (they’ve already spent down assets etc.), so this really would be devastating to a lot of seniors.

  46. Kevin says:

    DougR is absolutely correct. This article is nonsensical fear-mongering.

    Social Security will most definitely still be there when you retire. Heck, it’ll be there when your KIDS retire (though they may have to wait until they’re 68 to start claiming it – the horror!)

  47. Kevin says:


    “Simply removing the cap on taxable income would keep the program solvent into the 2080s (which is as far as they project anyway). FICA taxes are the only taxes in this country that are explicitly regressive, and it’s time we changed that.”

    If you’re going to remove the cap on taxable income, then you should remove the cap on benefits, too.

    Presently, they cap the taxed earnings, because there’s a limit to how much SSI will pay out annually in retirement. Once you’ve hit the “limit” to what you qualify for, it would be unfair to be required to keep paying, if those extra payments don’t translate into additional benefits.

    Carey, the problem is that people like you have the mistaken belief that SSI is a welfare program. It is not. It is a forced savings program. Your comments reflect your desire to turn SSI into yet another wealth-transfer program, which was not at all its intended purpose. Your benefits are based on your contributions, so if you’re going to cap the benefits, then you HAVE to cap the contributions, too.

    Otherwise, just raise taxes on the rich even more, and get it over with. That’s what you really want anyway, isn’t it? More wealth redistribution from the successful to the lazy? Don’t take the cowardly way out and do it under the veil of FICA deductions – at least be up front about your class envy and do it the way it’s always been done – by taxing the rich directly.

  48. lurker carl says:

    If SSI were inacted today under the original guidance, the youngest retired folks receiving benefits would 86 years old. Everyone else would still be working, living destitute with relatives or surviving on quarterly dividends.

    I wouldn’t be surprized if the “new” full retirement age is stretched out to age 75 with a minimum of 80 quarters paying into the system.

  49. Carey says:

    Congratulations Kevin, you really are an expert at sweeping generalizations. In my experience, however, how lazy or hard working someone is has little to do with their income.

    Why does the cap on benefits have to be removed if the cap on taxable income is removed? Is there some unwritten rule that you only have to pay taxes for something if you get an equivalent benefit? I think not, otherwise I wouldn’t have to pay school taxes (since I don’t have children). And the only people who would have to pay for unemployment benefits would be the unemployed. Fortunately, we do not live in such a system.

    SS taxes are assessed regressively. If you like that system, why not just say so? Just come out and say you love regressive taxes. Don’t hide behind your “wealth transfer” fear mongering if you support wealth transfer upwards.

  50. Kevin says:


    Again, you’re looking at SSI as a welfare program. It is not. It is a forced savings program.

    Your comments reflect your desire to turn it into yet another wealth-redistribution program. That is not – and never was – it’s intended purpose.

  51. Chris Gagner says:

    I wish there was a way to opt out of social security. I feel as if the Government is forcing me to save part of my retirement in a bad investment!!

  52. DivaJean says:

    I am in the worst possible group of folks who will miss out.

    At my birth year (1966), I have to be 67 to be elgible for Social Security. However, it will be gone at current calculations when I turn 71. IF I get anything, I will get it long enough to see what it could be- but in all likelihood, it will get moved out until I’m 80 or so.

    Just like drinking age happened for me in the 80’s. I was 18 when it got moved to 19 (in New York State)- then shortly after I turned 19, it moved to 21.

  53. jane himarios says:

    What #39 Kevin @ 9:03 am October 5th, 2010 said.

  54. Vicky says:

    I’m a single mom with two children. I really don’t understand the comments that illegal residents are in any way “good” for our economy.

    Their children attend our neighbor school for free (we’re required by law to education children for free even if they are here illegally,) they eat free lunches, and last night at the grocery store the couple in front of me had a WIC voucher for free food. They had cash for the extra junk they purchased that the WIC voucher wouldn’t cover, of course.

    And since they can’t legally be employed, any earned cash under the table doesn’t get taxed. I have nothing against educating children, but we’re rewarding these people for coming here ILLEGALLY by paving their way with free food and a free education! Meanwhile, my kids are working nights and weekends to pay for college.

    The WIC program is awesome for getting food to American women and children that need it, but the system is being sorely taxed by people that come here illegally and then take advantage of the free handouts offered up by my tax dollars.
    I have nothing against any race of people, my own family is multi-racial, but I have a big problem with people sneaking into our country and draining our hard earned resources. I’m sure not seeing them as a cure for what’s wrong with Social Security.

  55. Matthew says:

    Hey did Trent ever explain why he abruptly stopped podcasting?

  56. 8sml says:

    Vicky: If you’re concerned about how much illegal residents get for free, why not campaign to make it easier for them to become legal residents/citizens? Then they will pay for all the things you do, in the same manner.

  57. Katie says:

    Vicky, first of all, how did you know the couple in front of you was illegal? I’m sure you know them personally and are aware of their immigration status, and you didn’t just assume they were illegal immigrants because they are non-white and/or non-English speaking, because that would be really racist and your multiracial family members would probably be annoyed by it. You might want to clarify that so people don’t jump to assumptions about what you meant. (Also, I’m sure you won’t judge people for paying cash for their totally legitimate purchases just because you personally think that, uh, illegal immigrants should never buy food that isn’t 100% healthy or something? Unclear on where you’re going with that.)

    Second, illegal immigrants do pay into the system; the IRS doesn’t check immigration status and people who aren’t legally employed do, in fact, pay taxes through their employers.

    Third, you might look into fruit that is literally rotting on the vine after immigration crackdowns before you go on and on about the drain on society.

  58. valleycat1 says:

    @ #44 Vicky – you have to be a legal citizen to collect WIC. Children born in the USA to people who came here illegally are US citizens & the benefit is calculated only for the child(ren) who are entitled. Plus, a lot of illegal immigrants are holding jobs where SS is being withheld by the employer but they will not be able to collect on those earnings – so that ‘helps’ the SS fund in general because they are paying in but cannot collect.

  59. todo es bien says:

    First off, SS will not be going broke. If you think so, you are responding to media hype. The bad news is, not looking good for Medicare at all. As Doug points out above, do some research… Here is one that worried me a bit though… According to Fidelity a couple should budget about 350,000 for medical expenses for a man and 450,000 in medical expenses for a woman. This, plus the minimal million to retire, means you need to have probably 2 million to comfortably retire. That is NOT GOING TO HAPPEN for the great majority of Americans… Save as much as you can and hope you get lucky.

  60. Ted says:

    Trent, you’re right that people shouldn’t consider social security to be “retirement savings”. You’re wrong about the condition of the program though. It will need adjustments to be sure and unfortunately our politicians keep kicking the can down the road instead of confronting reality. In addition they’ve been borrowing from social security for thirty plus years and will have to pay that money back out of other tax dollars (which will inevitably cause tax increases).

    That said, Social Security will continue to exist for a very, very, very long time unless and until it is replaced by a different income security program.

    SS is not retirement savings. It is actually an INSURANCE policy that we pay into that protects our income from outliving our assets, from an income-producing spouse or parent dying, and from becoming totally disabled. In fact, it’s called the Old Age Survivors Disability Insurance (OASDI) for that very reason.

    Social Security lives on despite the fearmongering about it that sadly, Trent, you’ve contributed to with this piece. I think you should write about what social security is and is not and collect input from more informed people before writing about its apparently imminent demise.

  61. Tara C says:

    I disagree that SSI is merely a forced savings plan – there are disabled people that get payments who have never contributed anything. I think it is a combination savings/welfare plan.

    Interestingly, in Australia they have a social security system that is means-tested. Everyone must pay in, but only those who are impoverished at retirement age actually receive payments. I would not like our system to operate like that, but I think it is fair that those who are blessed with greater means should share with those who have not, so I support removing the income cap on SSI but not increasing payouts.

  62. Belinda says:


    You may also be surprised to learn that illegal immigrants DO in fact pay income tax, to the tune of $70 billion a year, through a little program called the TIN which our good old IRS instituted for the exact purpose of extracting taxes from illegals. It’s one of the reasons our government makes it so difficult for foreigners to obtain citizenship. There are too many ways in which our economy actually benefits from keeping them illegal. Dirty little secret you aren’t likely to learn about on Fox news.

  63. Kevin says:


    “I disagree that SSI is merely a forced savings plan – there are disabled people that get payments who have never contributed anything. I think it is a combination savings/welfare plan.”

    I admit it’s complicated, but the Social Security Act includes both.

    What you’re talking about is SSDI, or “Social Security Disability Insurance.” You’re right, that *is* a welfare program, and is intended to provide a minimum level of income to people who are physically or mentally unable to work.

    The Retirement Insurance Benefits (RIB), however, is based on your lifetime contributions into the program. If you’ve hit the maximum each year (and meet the other criteria), then you’re entitled to the full benefits. Otherwise, your income from the program is reduced, based on your diminished contributions. This program definitely is a “forced savings program.”

    I’ve been misuing the abbreviation SSI. It’s actually Supplemental Security Income, and is a welfare program that provides a basic level of income to retired people (regardless of disability, unlike SSDI). I should have been saying RIB (Retirement Insurance Benefits). I apologize for the confusion.

  64. Michael says:

    “It is astonishing that not a single economist in the White House of the 1930s explained to FDR that the system was eventually going to become untenable.”

    THEY DID!!! It always amaze how people talk about SS without knowing ANYTHING about its story and how it was implemented.
    Go read the congressional hearings about SS and be amazed on how the gentlemen how designed it already knew what was going to happen a few decades later.

    And guess what: they were totally ok with it! The system was never designed to be self-funded for ever and ever, that idea arose many decades later because the federal government likes to have a wealthy SS to drain money from it, because it’s much easier to raise the mandatory contributions to SS (or reduce the benefits) and then take money away from it than to create new taxes. That’s right lads, the federal government takes money away from the SS’ profits every chance they can, and they will keep doing it.

  65. I raised 6 children on very little money (the last one is still with me and is 16) and have never been able to save. My credit sucks. I am 57 and have no choice than to hope Social Security takes care of me at 65/67/whenever, but I truly believe I’ll have no choice but to work till I drop dead. I don’t have a flashy career (in fact, right now I’m unemployed as my company closed it’s doors after 30 years in business, I’d only worked there 6 years). Posts like this depress me because I realize it’s too late for me.

    Debra Masters

  66. kristine says:

    Belinda, I did not know about TIN. I am going to read up on it. Sounds like taxation without representation! Uhm…wait a minute…this is America, right?

  67. AnnJo says:

    Removing the cap on taxable income without removing the cap on benefits will sever the last link between contributions and returns, completing the transformation of Social Security into a straight-forward income redistribution program. (Since it was designed by 1930s-era socialists in FDR’s administration, it was always intended to end up this way.) I expect that to happen within the next decade or less.

    This transformation will increase political pressure to improve benefits, since most recipients and future recipients will no longer see themselves paying the tab, but expect it to be passed on to “the rich.” France and other European nations are currently facing the consequences of that system, with absurdly low retirement ages, high relative benefits (to the amount contributed) and political turmoil at any attempt to render the system fiscally sound.

    I also disagree with Trent on this. Social Security will continue to exist. It and other redistributive schemes may break the country’s economy, and the benefits are likely to be paid in dollars worth much less than today’s, but it will continue to exist.

  68. Doug says:

    If I were to start an investment business for retirement income and used the Social Security model, I’d be arrested for operating a Ponzi scheme.

    How about this compromise: Offer everyone the ability to opt out and never pay another dime in Social Insecurity taxes. Heck, you can even keep what you’ve already taken from me. Just leave me alone to invest my money on my own.

    But no, that won’t happen, because an independent electorate is the absolute last thing politicians want. Better to keep them scrounging for the scraps of the latest entitlement, whether it be Social Insecurity, ObamaCare, or NeverEnding Unemployment Benefits, all paid for by the productive members of society.

    I wonder what happens when all the productive members of society retire and die off, and y’all are left with nothing but the gimmegimme class.

  69. As Bernanke said when questioned by Ron Paul. We cannot guarantee the future value of social security payments. Keep up the good work Trent.

  70. Ryan says:

    How is ObamaCare entitlement?

    People still pay for medical insurance…nothing is being given to anyone.

  71. Brandon says:

    As DougR and some others point out, this article is a repeat of some of the misinformation floating around about Social Security.

    First, the Roosevelt administration accounted for a lower birth rate and longer lifespans when calculating the numbers for social security. If anything, versus those numbers, we’re slightly behind in expected lifespan.

    Second, as others have pointed out, the program isn’t expected to have an issue until almost 30 years away, at which point, the worst that could happen, with zero changes, is that it only pays out 80% of what it does now.

    Thirdly, minor changes can easily fund the program for another 80 years or so (at which point you’re pretty much trying to read tea leaves), such as lifting the pay-in cap (around 108k if I recall).

    All in all, the program is one of the most financially sound portions of the federal safety net. Start investigating the motives of anyone who likes to argue that it’s failing, etc. I think you’ll find that they’re motivated by factors other than your self interest. After all, there’s a ton of money to be made whenever privatization comes up in government, especially when it involves the retirement funds of every person in the country. After all, someone has to spend all that money and make amazing fees were all of that money to hit the stock market. Bubble anyone?

  72. Brandon says:

    I should note, that asking people to not rely on anything but themselves in life is sound advice, and that my “start investigating” line was more in reference to certain politicians, business leaders, advisors, and “think tanks”.

  73. Johanna says:

    The thing is, people under 40 (and I include myself in this) have the luxury of imagining a future in which everything goes according to plan. You save consistently for 25-35 years, you’re not met with any disastrous interruptions in income or unexpected expenses, the market performs reasonably well, you don’t make any mistakes with your investments, and inflation doesn’t eat away too much at your nest egg’s purchasing power.

    That’s how I imagine my own future, anyway. If nothing goes wrong, then I’ll have plenty of money for retirement. Even if things go moderately wrong, I should still be all right. But nothing is guaranteed, and it’s always possible for things to go wrong in a way that overwhelms your ability to handle it yourself. That’s what Social Security is for – to prevent you from having nothing. So am I relying on Social Security? I hope not. But who knows?

    Also, Trent, please get over the idea that the retirement age is going to be raised to 80. Last time you mentioned that possibility, I think you were talking about it happening in your children’s lifetime, not yours, and even then, it didn’t seem to be based on anything except your own imagination. If the retirement age is raised to 80 in our lifetime, I will eat my hat. If I have a hat.

    The people who talk the most about raising the retirement age are usually the people for whom it matters least. For those of us with cushy desk jobs, working until 75 or 80 or beyond may be an option. But for people with hard, physical jobs, it might not be. Even if life expectancy increases to 100 or beyond, the ability of an 80-year-old human body to pick green beans all day is not going to improve that much, I don’t think.

  74. AnnJo says:

    Here’s how Social Security works.

    Say you contribute $3,000 a year to X, in return for which X promises to pay you benefits when you retire. X then turns that money over to Y, who spends it, while giving X a promise to repay the money later. X now holds a Note for $3,000 from Y. Neither X nor Y have any assets backing up the Note and the money is all gone.

    Y does have guns and a printing press, so it has the “ability” to pay X back, by going out and seizing the money from future taxpayers or printing the money (inflation).

    However, Y is already taking a substantial amount of the nation’s economy to cover current bills. If it were required to currently set aside enough money to fund its future commitments, the amount needed would be around $8 trillion (present value). In an ordinary business or household, unfunded liabilities (liabilities for which no known source of future income is available to pay them) would represent bankruptcy.

    As I said before, it will continue to exist, but it will do enormous damage to our economy. Either the guns or the printing presses (or both) will be used heavily.

  75. Mr. GoTo says:

    There are two big problems with this post. First, folks (particularly young folks) have been predicting for years that SS will disappear for them. Not only have they been wrong, but while they have been making these dire predictions, Medicare and prescription drug coverage was introduced for retirees. Then these predictors hit their 50s and guess what, SS looks really good to them. The other problem is that if you assume that SS will disappear, you are likely to take on too much risk in a desperate attempt to compensate. That is a big mistake. Everyone should prepare diligently for retirement but these unfounded predictions about the future of SS are not helpful. I would think and hope that Trent would know better.

  76. Vicky says:

    I didn’t know about TIN. I do say it hardly seems right to require people to pay into a system they can’t benefit from. Letting people come here illegally just to exploit them is wrong. How can our politicians justify making this law?

    Legal residents of American have to speak English. The couple at the store could not, and had a license tag from Mexico. Having WIC vouchers, though, indicates they have lived in my county long enough to apply for and start collecting benefits.

    And, true, children born in this country are Americans. I hadn’t considered that. My downstairs neighbors have had two children since coming from Mexico. (Nice couple who obviously adore their kids.) That’s why there is a movement to change the law on this issue.

    There are many comments from people that suggest making people legal residents resolves all wrongs. It doesn’t. I have a friend at work that came here from Europe and is doing all she can to legally pursue residency. She and her husband are jumping through hoops to do it the right way. Those are the people I welcome into this county. And before someone gets huffy, no, they are not white Europeans but rather of African descent.

    As for the fruit rotting on the vine, I don’t eat fruits or vegtables that aren’t locally grown. Check out the business Door-to-door Organics. So, genetically modifying fruits and vegtables so that they look good when picked green and shipped hundreds of miles, but taste nothing like fruit or vegtables should, just doesn’t interest me. At all. I don’t care who picks them. I’m not eating them, and I don’t believe that anyone else should, either. And I am entitled to my beliefs.
    Just as you are entitled to disagree.

  77. Johanna says:

    “X then turns that money over to Y, who spends it, while giving X a promise to repay the money later. X now holds a Note for $3,000 from Y.”

    When X is a private individual like me or you, this process is called “investing in Treasury bonds.” The money isn’t “gone” because the bonds can be cashed in or sold to another investor at any time. Why is it fundamentally different if X and Y are just different offices within the federal government?

  78. AnnJo says:

    Johanna, yes, you could say the money is “invested in treasury bonds,” but current budgets to not project sufficient revenues to actually repay those bonds without vigorous resort to the guns or printing presses. Which is my point – the ONLY way of keeping the commitments of Social Security in the future is higher taxes and/or higher inflation, both of which are damaging to the overall economic welfare of the country. I do not argue that the bonds will go unpaid (although there is a remote chance of that), only that the means of repayment will do a lot of damage.

    We both read this site because we share a commitment to living within our means. I suspect for both of us, that means not spending borrowed money on current wants or needs when we have no idea where the funds will come for repayment, where the debt repayment schedule requires income we have no means of obtaining and where the debt is not backed up with real assets we can sell. What is sound household economy for us is also sound on a broader scale. Why should it be fundamentally different for the federal government?

  79. Johanna says:

    “Why should it be fundamentally different for the federal government?”

    Well, that’s a totally different kettle of fish than the topic of the original post, but I think the answer is twofold: (1) because the federal government can borrow money at interest rates far lower than are available to you and me, and (2) because the federal government does not have to save for retirement.

    If I weren’t faced with the possibility of having my earned income cut off entirely (whether by choice or by necessity), I would have no reason to keep my net worth trending upward. Instead, it could hover around some fixed value, growing a bit when times are good (say, when my income naturally rises or my expenses naturally shrink) and dipping a bit when times are bad.

    And if I could borrow money at the same interest rate as Treasuries pay, it wouldn’t be so bad if my net worth went negative from time to time – or even if it stayed there permanently. I could pay down the debt a bit when times are good, and borrow more when times are bad. I’d be paying so little interest that paying off the debt completely would hardly be worth the effort.

    I do agree with you that it’s probably not a good idea to keep borrowing more and more and more. But times are pretty bad right now, so this is not the time to try to pay down the national debt. (This isn’t a perfect analogy, but if you’d just taken a pay cut at work, that wouldn’t be the time to start paying extra on your mortgage. In fact, you might take on some additional debt to go back to school or start a business to try to earn some more money.)

    The last time we did pay down a bit of the national debt – 10 years ago or so, when times were good – the anti-tax folks started shouting that because the government was collecting more in taxes than it was spending, that was proof that taxes were too high and needed to be cut. How are we supposed to pay down the debt at all with attitudes like that?

  80. Kevin says:


    You anti-genetically-modified foods people need to put down the liberal rags you consider “newspapers” and get your facts straight.

    If you take a Golden Retriever and breed it with a poodle, do you end up with a litter of misfit “Frankendogs,” that look and act nothing like dogs?

    No, of course not. You just get some regular, playful mutts. They’re still perfectly normal dogs.

    Just like GM foods.

    Stop the fear-mongering and use some common sense. Quit blindly accepting everything you hear from that farming lobbyists. If you think it really is about delivering healthy food, and not about money, then you’re clueless.

  81. Katie says:

    Legal residents of American have to speak English. The couple at the store could not, and had a license tag from Mexico.

    Legal residents do not have to speak English. Citizens have to pass a citizenship test, but that’s a different thing.

    I’m all for nice, locally grown organic vegetables but we simply do not have the infrastructure in place to feed the entire country on them affordably, nor is this economy benefited by non-organic producers going out of business suddenly for lack of labor.

  82. HonestB says:

    “What is sound household economy for us is also sound on a broader scale. Why should it be fundamentally different for the federal government?”

    Just by way of example: let’s say a you live in a city with a lot of debt and a real revenue crisis. They can choose to either borrow money to keep plowing snow in the winter or just not do it. If they choose to borrow, then people can still get to work and create value during the winter. If they leave it alone, then they’re making the situation even worse by refusing to borrow, because now people in the city can’t get to work. There’s a lot of more complex choices where you have to trade off between borrowing now or taking a bigger loss later. Individuals can’t always make these choices because we can’t absorb that kind of debt. Governments, on the other hand, can be up to their ears in debt and relatively stable.

    @Kevin There’s a big difference between GM and cross-breeding. If you don’t understand the difference, you might want to read some basic books about biology before insulting other people’s reading habits.

  83. Vicky says:

    Kevin: Go ahead and eat them if it’s a risk you wnat to take. But the GMO foods are not the case of farmers breeding two dogs – your example. It is the equivilent of inserting the gene from a virus into a dog. “It can be said that modification of plants is not a new phenomenon. For centuries, gardeners and farmers have been crossbreeding different species of plants to create plants that produce heartier, better tasting, or more beautiful crops. However, the type of genetic engineering of foods that has caused a groundswell of concern around the world is vastly different from these traditional plant breeding practices. With modern genetic engineering, genes from an animal, plant, bacterium, or virus are inserted into a different organism (most often a plant), thereby irreversibly altering the genetic code, the “blueprint” that determines all of an organism’s physical characteristics, of the organism that received the gene.” World’s Healthies Foods. Sounds to me like you haven’t studies the facts at all.

  84. Vicky says:

    Katie: If more people purchased organics, they would become more plentiful and affordable. I agree that the sudden demise of any farmers is not desirable. But I also don’t believe that we’re all OWED a living at whatever career we choose to pursue. If a supplier can’t produce their products in an ethical, legal manner, then it should not survive. Buying local and eating healthy foods from smaller farms would cut transportation costs and allow less of our food to be produced under the control of a few huge corporations. Have you seen the move, Food Inc? Fascinating study. Thanks for your comments. I appreciate your points.

  85. melogos says:

    Many believe the jury is still out on Social Security. I think it will survive: http://www.christianretirement.com “Can Social Security be Saved?” If it survives it may be so different from what we now know that it will be unrecognizable.

  86. MiHi says:

    This has got to be the most inane, most biased, most incorrect article I have ever read on the subject of Social Security! All this unwarranted doom & gloom about some implosion that will NEVER take place.

    I notice that this genius had absolutely nothing to suggest for those who are old or disabled and needing their Social Security payments right now.

    Listen up, imbecile. Social Security is FINE! It is running a SURPLUS for several DECADES from now! Remove the rich-friendly earnings cap and you will have solved whatever shortcomings may happen down the road.

    Man! The amount of Epic Stupid in this article gives me a migraine!

  87. Anna says:

    Some people who are young have already benefitted from social security and Medicare. Some have been disability beneficiaries or children of someone who was retirement age, received disability or died. Even those who have not had this direct benefit may have benefitted if they are not from a rich family. They may have enjoyed a better lifestyle and education because their parents were not supporting their parents and/or grandparents and paying their medical bills. I have a particular viewpoint about this, as I worked for SSA. I’ve written a book about the subject of social security.

  88. AndrewDover says:

    It won’t do you any harm to save as if Social Security wasn’t there. But it will be there for something close to your scheduled benefits. The polyannas, are wrong, and so are the doom sayers. There is an actuarial deficit for social security which can be fixed through some combination of slower growth in benefits or increases in the taxation base. You can fix it now with a small adjustment, or later with a larger adjustment.

    If nothing is done until around 2040, then the trust fund will be empty and only around 75% of expected benefits will be payable from incoming payroll taxes.

    There are people paid to understand the financial status of social security. Why not read what they write rather than make up views without actually looking at the numbers?

    See http://www.socialsecurity.gov/OACT/TRSUM/index.html

    and then comment.

  89. annieok says:

    Well, my relatively conservative portfolio was doing well for about 30 years before 9/11 and the stock market implosion. Was I planning on it being halved as I neared my 60’s? You won’t either. To all those free marketeers out there, good luck with socking away enough savings to take you through your last 20-30 years. Think you can still work if you’re willing and able? Not unless you own your own business. Unions have up and gone in the U.S. so defined pension plans are a thing of the past. Your pension will rise and fall on Wall Street shenanigans or the money you’ve stuffed under your bed. Very few companies pay anything toward your medical premiums after retirement anymore. Social Security is a major portion of what many people will have left. Capitalism came close to collapse in the 30’s before it existed and will again if the pols ever try to dismantle it.

  90. hewhoasks says:

    Over and over the front people for the forces that wish to destroy Social Security make the same claims.

    Let’s jump instantly to basics: if the target audience for this dire warning is going to have support in their retirement that support will come, ultimately, from those still working when they have retired. So if the aging of the population and the lowering ratio of workers to retirees combine to make a problem then that problem is there no matter how current workers plan for their retirement. That means it’s empty chatter to say “plan for your retirement separate from Social Security.” If it’s possible (to have a secure retirement), it’s possible. If it’s not, it’s not. How you channel the retirement money doesn’t have a magical effect either way (through Social Security or through “personal account” investing.) Know with certainty that financial markets are not magic money machines (except, perhaps, for those at the top who manipulate them to separate the rest of us from our funds.)

    Bottom line: if you want to have an intelligent discussion of this matter then don’t spend your time listening to or talking with people with a hidden agenda. You will get nothing useful from spending your time that way.

    OK, be charitable. Rather than say they’re pushing the “destroy Social Security” agenda say they’re only parroting the talking points from those who do have that agenda. Still a waste of time.

  91. AnnJo says:

    @HonestB – “Governments, on the other hand, can be up to their ears in debt and relatively stable.”
    Until, one day, they’re not.

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