The Future of Social Security: Will Your Money Be There for You?

As retirement gets closer and closer, many of us are growing more concerned about whether Social Security will be around to supplement our savings for ten, twenty or even thirty years or more. We've paid into the fund all or most of our working lives. Worrying about whether that money will be there when we need it is only natural. Is the Social Security system really in trouble? Here are a few things to consider:

1. Funding. According to the US Social Security Administration , the existing funds in the three Social Security trust accounts are sufficient to pay benefits in full until through the year 2035. After that point, assuming no changes in Social Security funding, taxes would be enough to pay just 75 percent of scheduled benefits.
2. Power in Numbers. More than 50 million Americans draw Social Security benefits and that number is expected to grow to 55 million in the next decade. Numbers like those are difficult for members of Congress to ignore, especially with the 40-million-member AARP championing the cause of retired people across America. Some changes are likely to be made to the Social Security program.
3. Better Money Management. Currently, the money in the three Social Security trust funds (the money that is used to pay benefits) is automatically invested in low-interest/low-risk US Treasury bonds. As of November, 2011, these bonds are yielding around 2.75 percent annually. Several investment publications, including The Bloomberg Report , have suggested that the government take a more aggressive approach to investing the Social Security funds. According to their research, just switching to a relatively safe blue chip stock fund could more than triple the funds' annual return.
4. Reform. Facing the fact that Social Security funds will be inadequate to pay full benefits in 25 years, several proposals for changing the Social Security system have been discussed in Washington. Among these are different methods of funding the Social Security program (such as using money from the general tax fund); switching to personal accounts, where each retiree is paid from the money he or she directly contributes, rather than from the pool of funds; and as a last resort, the reduction of benefits for future retirees. (No proposal thus far has suggested cutting benefits for current retirees or for those nearing retirement age.)

The future of the US Social Security program as we have known it is uncertain. However, since nearly one in six Americans currently receive benefits and most Americans are likely to receive them if they live to retirement age, it is an issue that cannot be ignored by our legislators. If this is something about which you feel strongly, make yourself heard. Write to your Member of Congress or your local newspaper. Let your views be known.

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