Social Security: No Longer a Safe Bet

People retiring today are the first generation of workers who have paid more in Social Security taxes during their careers than what they will receive in benefits after they retire. This is a historic shift that appears will only get worse for future generations.

Previous generations of retirees got a much better bargain. Payroll taxes were very low when Social Security was enacted in the 1930s. If you retired in the 1960s, you could expect to get back seven times more in benefits than you paid in Social security taxes, if you made it to age 78 for men and age 81 for women.

As recently as 1985, workers at every income level could retire and expect to get more in benefits than they paid in in Social Security taxes. Not anymore. A married, dual-income couple retiring in 2011 paid in about $598,000 in Social Security taxes during their careers. However, they can expect to collect only $556,000 in benefits, according to an Urban Institute study.

Social Security benefits are progressive. Most low-income workers retiring today will still get slightly more than they paid in. However, beginning in the 1990s, most higher-income retirees started getting less in benefits than they paid in taxes, according to Social Security Administration data.

It’s more important than ever for each of us to take personal responsibility for our own financial retirement security. Relying on the government will not be adequate for most people to maintain their standard of living throughout retirement. Here are the two most important things you can do:

  1. Make a commitment to live below your means.
  2. Save at least 10% of your gross income into a retirement savings plan. If you can’t start at 10%, start somewhere and gradually increase the percentage as you get pay increases. This is not something you can delegate. You must take the responsibility to do this for your own benefit. Start now.

Financial responsibility rests with you. Take personal accountability and “just do it.”

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