Are you banking on Social Security?

December 19, 2011 · 36 comments

Are you setting yourself up for self-sufficiency? Who do you rely on for survival? Do you know what you need to do today, to have ‘enough’ 20, 30, or 40 years from now?

If you’re planning on social security providing for you, like a mother’s milk provides for her baby, it’s time to start “feeding” yourself. Here’s the steps we have already taken, are currently taking, and will take, to ensure we aren’t dependent on the government to pay our bills…

No stupid debt:

I’m not as intense as Dave Ramsey. If you want to take out a 0% car loan, fine by me. But if you are up to your eyes in credit card (or other high interest debt), then you need to get your crap together and start working your way out. The path to financial success starts with paying yourself (not Sallie Mae) first.

A reasonable mortgage:

Do you know how long a 30 year mortgage takes to pay off? THIRTY FREAKIN’ YEARS! That’s insane. I’m not even 30 years old! I couldn’t imagine making a payment for three full decades. Girl Ninja and I have no clue what the terms of our mortgage will be, but I can promise you this, we aren’t going to buy more house than we can afford. Home ownership is still a year or more away, but our goal would be to keep our mortgage payment under 30ish% of our net income. I like the flexibility of a 30yr mortgage, especially since you can pay it down in 20, 15, or 5 years if you want.

Investing/Saving:

This is where true government independence comes in. If you want to retire (aka not work anymore) you better start doing something about it. The Roth IRA and 401K are my investment vehicles of choice. By putting a few bucks away today, I plan to have a couple million waiting for me during my golden years. I don’t care how old you are, the time to start investing was yesterday. Get to it!

There are a few other things that consist of our financial commandments like living within our means or shopping around before we make a purchase, but I figured it’s best to bore you any longer. Moral of the story is this: If you are 50+, you will probably receive at least some social security benefits. If you are 50 (or younger) you may still receive some benefits, but it’s time to wean off the government teet and start feeding your bank accounts.

To those of you that are 50+, did you plan some of your retirement income around social security when you were younger?

To those that are 50 or under, are you banking on the fed financing your years in adult diapers?

Do you think there will be any social security programs when us 20-somethings retire?

What do you think the social security age will be 40 years from now?

p.s. I wrote this article one year ago and moved it to the front of the blog for relevant discussion today.

1 Emily Hunter

I’m 41, and the idea of me receiving Social Security is an absolute joke. I’m with you and plan to push my money toward investment programs and retirement programs that will make me some money and let me flourish and thrive when I’m older. I look at it from a very simplistic point of view, honestly.. during my working career, I put in (let’s say) $250 bucks a month to Social Security. And, when I retire, you’re going to pay me… $900 bucks a month for the rest of my life? Awesome! And you’ll still do it if I survive 30 years? Double awesome! :)

I think that if SS is offered in 40 years, the age will be around 85 or something.

2 mom4you3

Well we are 50 – so we are right in the middle…..we have some of our own and a great son who has pormised to “put us somewhere far away” if that is what is needed…

3 cashflowmantra

I will be 44 in a couple months and don’t plan on getting a penny back from social security. I figure that I can only count on myself so I am in the process of paying down debt and building up multiple sources of income so that I am well diversified.

4 Jennifer

I’m 43 and not counting on social security at all. I think for you 20-somethings, you’re not going to be able to collect until you’re like 90 years old. ;)

5 Larry

First, all this talk of “mother’s milk” and “teets” and “diapers” rings more than a little false from someone who is eventually expecting a government pension.

But it rings false anyway. Social security is not a program that gives you something for nothing; it is a program to which you make contributions through you payroll taxes, as is Medicare.

When originally enacted, life expectancy was only a few years beyond the standard retirement age, which meant that much less of a drain on the SS fund, and pensions from private-sector employers were more common. Now people may have to fund retirements that last 25-30 years, which puts a far greater burden on the SS system. And must as I agree with our always-charming host that each individual ought to save as much as possible and stay out of serious debt, a huge percentage of the population are financially strapped, unemployed or underemployed, and unable to meet basic expenses let alone save for the future. And that obviously increases the strain on SS even more.

But there are several reasons I believe the program will survive even for those of you who feel assured (sometimes cynically so) that you’ll never get a penny from it. One is that SS has been extremely successful over the past 80 or so years in keeping people out of poverty. Second, lobbying groups like the very powerful AARP will not give up SS without a fight. Third, the problems with SS are relatively easy to fix if Congress gets past its inertia – some combination of a higher full retirement age, a higher payroll tax cap, means testing, and somewhat reduced benefits should take care of it fairly well.

The much greater problem is skyrocketing health care costs.

As for myself, one retirement calculator (each one gives a different result) has told me that as of now, I can survive through age 76 without social security, and 88 with. I’ll take 88.

6 StackingCash

I agree. Social security better be around because I’m paying for it now. I cannot stand when people just concede their social security contributions as lost money. Fight for it! Don’t be wimpy and let the government rob you like that. In regards to feeding off the government’s nipples, you should really look at yourself DN. How can you sit there and insult those who collect or plan to collect SS when you are “earning” 70k plus benefits from the government directly. This country is in terrible shape and you have the nerve to tell people save more money and invest when probably 50 percent of this country is making a fraction of what you or even I am making. Time for some humble pie, you and others in the PF blogs are really getting out of touch these days.

7 Larry

Case in point from one particularly loud-mouthed blogger: “It would take a big time knucklehead to not be able to accumulate over a million dollars by age 60.” Right, in America, where 1 child out of 5 now lives in poverty and 1 worker out of 2 is classified as poor or low-income. One wonders at times what planet some people are living on.

8 Ninja

Larry, yes I expect the pension (assuming I stay with the fed long enough to qualify for it). But how does that make me hypocritical? I’m not planning my life around the pension. In fact, I don’t even take it in to consideration when I make estimates as to what my retirement balances will look like. My 401K and my Roth IRA are hopefully going to be able to take care of me and Girl Ninja for as long as we are around. Any pensions or SS will be welcome, but not planning my life around them.

9 Ninja

I’m out of touch? StackingCash, you are the one who has stubbornly refused to invest anything in the stock market even though it is the highest performing investment vehicle in history, simply because you let your emotions get the best of you during a tough market? Come on.

Can you please provide context for which I “insulted those that plan to receive SS?” I’m all for people collecting it. Hell, we’ve all paid in to it, so we should all get something out of it. I was simply saying I was skeptical about the ability of SS to be in existence by the time I (or other younger people) are eligible collect it. I have NO issues with collecting SS, just like I have no issues with people who collect unemployment (again it’s a paid in to program), so I don’t know why you think I insulted those who will draw from SS.

I will always tell people to try to earn more, try to save more, and to try to invest more. I’m a freakin’ personal finance blogger. Am I more optimistic than most? Probably. Do I want everyone to work as hard as they can and do the best they can for themselves? Yes. Will I probably come across as apathetic sometimes? Yes. I’m not perfect, but there is nothing wrong with encouraging saving/investing. I’m assuming you want me to just not write about saving money ever again, just because some people don’t have the ability to? Everyone has to do the best they can with what they are given.

I hate that you bring my position with the Government in to this as though I am somehow hypocritical for it. I am dependent on the government for a paycheck. No different than you are dependent on your employer for your paycheck. Am I not allowed to encourage people to plan their own retirement, just because I work for the government? That’s the stupidest thing I’ve ever heard.

I feel like you want my message to be “I work for the government. Social Security is in awesome shape and will take care of all your wildest dreams.”

Is that about right?

You need to re-read the post. There is no condemnation of those who do (or plan to) receive SS benefits. Nor is there any condemnation of those that are struggling financially and unable to invest.

10 Larry

Simmer down, Ninja. May I quote you?

“If you’re planning on social security providing for you, like a mother’s milk provides for her baby, it’s time to start “feeding” yourself.

“To those that are 50 or under, are you banking on the fed financing your years in adult diapers?

“I’ll also have a pension (and maybe Social Security…although I’m not counting on it) to provide consistent sources of income in retirement.”

Not to mention the captions on your cartoons. You’re treating people who expect SS (at least those under 50) as infants, and that certainly sounds insulting to me. And by the way, I’m with you and against Stack on the point about stocks and investing.

11 Ninja

“You’re treating people who expect SS (at least those under 50) as infants, and that certainly sounds insulting to me.”

I guess I just suck at communicating, because I obviously don’t think those that expect to receive SS benefits are “infants”. Heck, I plan to collect those very benefits if I’m eligible and they still exist.

Do I think it’s a bad plan for younger people to bank on S.S. being their life support come retirement, sure. If you are “younger”, you presumably have more time to hopefully save/invest. The economy wont decline forever, and eventually times will get better. So even if you are currently incapable of saving/investing, hopefully you can do it the very second your circumstances change.

Now I feel like I must insist that my intentions were never to insult anyone by talking about each of the points you made…

1. “If you’re planning on social security providing for you, like a mother’s milk provides for her baby, it’s time to start “feeding” yourself.”

I’m all for self-sustainability. There is a very real problem with Social Security, and it sounds like even you acknowledge that the benefits as we know them will likely not exist by the time I’m eligible to collect them. The age of retirement will likely be pushed back. There may be some reform in who is/isn’t eligible to draw on S.S, etc. Remember, for a baby, it’s mother’s milk is the only thing that keeps that thing alive. I do not think it’s a good plan for anyone to have equal dependence on social security. Maybe it wasn’t the best analogy, but I think even you would agree with it’s sentiment?

2. “To those that are 50 or under, are you banking on the fed financing your years in adult diapers?”

You could essentially reword this quote to read… “To those that are 50 or under, are you banking on the fed financing your older years?” I always joke about me in retirement wearing adult diapers cause I will no longer be able to control my bladder.

3. “I’ll also have a pension (and maybe Social Security…although I’m not counting on it) to provide consistent sources of income in retirement.”

You’ve read my blog for a long time Larry. You know better than anyone else that my PRIMARY investment vehicles are my 401K and Roth IRA. At the rate I am currently investing (according to historical averages) I should have more than enough between these two accounts to sustain GN and myself until we keel over. Obviously, I may be overestimating my return on investment, or leaving out unforeseen gaps in employment etc (but that is a different conversation than the one we are having). That said, I currently work for the fed and they offer a pension. I then must take in to account the fact that I could receive said pension when I retire. Just like I have also calculated what my S.S. benefits will be come the time I’m eligible (according to the SS website). A pension and SS would be great. I put more emphasis on things I control (Roth and 401K) and less emphasis on things I can’t (S.S. and pension).

I really didn’t intend to insult anyone, rich, poor, stupid, or smart. Hopefully that is a little more clear now.

12 Larry

DN: Maybe it wasn’t the best analogy, but I think even you would agree with it’s sentiment?
Yeah, it wasn’t your best metaphor, especially as you repeated it four times.

DN: I always joke about me in retirement wearing adult diapers cause I will no longer be able to control my bladder.
Did GN know you had this fixation before you got married?

DN: I’ll also have a pension (and maybe Social Security…although I’m not counting on it) to provide consistent sources of income in retirement. You know better than anyone else that my PRIMARY investment vehicles are my 401K and Roth IRA…. That said, I currently work for the fed and they offer a pension. I then must take in to account the fact that I could receive said pension when I retire.
I understand. Along the same lines, I may see an inheritance some day, but for obvious reasons I am not including that in my plans.

DN: I really didn’t intend to insult anyone, rich, poor, stupid, or smart. Hopefully that is a little more clear now.
I would have no objection if you insulted someone rich and stupid, like say Kim Kardashian.

13 tom

@StackingCash,

Fight for SS? Fight for a broken and antiquated system that few politicians have an interest in fixing? Fight for something that, along with Medicare, is bankrupting our country? No thanks.

Until Congress implements meaningful reforms, there is no point in fighting.

Also, lay off DN’s job. WORKING for the government is not the same as LIVING OFF the government. He is clearly “earning” his paycheck.

One last thing. Your comments have gone from contrarian to combative and trolling.

14 StackingCash

Your correct, my posts have been combative and trolling. Sorry about that. I think it’s been because this post struck a nerve with me, my hopeless quest to get others to see that even though SS and medicare are broken, that should not mean we should just concede a loss of such an important part to care for our seniors or ourselves in the future. There will always be those who game the system, but that should not let us lose sight how helpful welfare programs can be.

15 tom

But you bring up a great point. SS and Medicare are hopelessly broken, how can you put faith in a system that will ultimately fail?

I think people are conceding defeat on these programs because there is no hope w/in Congress of making meaningful and necessary reforms. The problem with social welfare programs as they stand today is that they are for everyone. They all need to be pared down to become need based.

16 Derek

Social Security is not bankrupting our country. Its a closed system that only pays out what is payed in. Its statutes mandate that it lends money to the government, who repays it with interest. This is the only investment available to the SS trust fund.

The system is flawed, in as much as our current politicians, whose distain for reality, are unwilling to adjust its rate of collection and payment to reflect unanticipated needs. Until it is reformed, its trust has only enough to pay full benefits until 2037, at which point, it will pay diminished benefits (anticipating ~70%).

Great site for reference material below, and a rather easy explanation of the system as it stands.

http://www.justfacts.com/socialsecurity.asp

17 Derek

I forgot to mention how one may think Social Security is bankrupting our country. Currently we pay a reduced payroll tax towards SS insurance. Instead of 6.2%, we are paying 4.2%. The difference is made up by the government. So it is linked to deficit spending, but not the cause.

18 dreemsie

No, it doesnt pay out whats payed in.

Inflation.

People getting paid longer than they worked.

Right now only 2 people pay for 1 payee, before it was a ratio of 5 and 6 to 1.

19 Derek

I meant it in a collective sense, not individually. It will not make unfunded payments.

20 Money Beagle

I think social security will be around for a long time. I don’t think it can be counted on for fully supporting anybody in retirement, but it can support a fraction of your needs. I guess what fraction it can end up supporting is the big question. My personal planning involves the answer “Not much”

21 dreemsie

I am 31 and do not plan on receiving social security, which sucks because I pay the max into each year. It is a broke system, that which I hope had good intentions all the long. Less pensions from companies and earlier retirements are screwing the program up, but what really is screwing it up is people getting full benefits is those who for all intents and purposes arent eligible for it. People who work a few years and then get full benefits. Or those who had low paying jobs and even newly nationalized citizens.

I think there will be something left when younger people retire, maybe some funds leftover for us, but I really think the government needs to put retirement planning into our own hands.

22 Mo D.

I’m 44, and not feeling the love that there will be enough gov’t money to go around when we retire, so we’ve taken matters into our own hands and contribute to an RRSP (we each have one through our bank, as well as through our employers). We’re also lucky to work for employers that offer pension packages. We’re not going to retire as long as we have a mortgage, and we’re working hard at paying down our consumer debt…. the goal is to retire debt free!

23 Brian

Unlike most people I think SS will continue to exist in some form as long as politicians want to get re-elected (basically echoing what Larry said above). That being said, I don’t plan of getting any from the government. I figure it will probably be means tested and since I am a saver I will miss out, and that is fine with me.

I learned to save from my dad who learned from his dad. Both of them got SS and pretty much used it to pay for the boring bills since they didn’t really need it. I would like to be in that situation.

24 whimsical melange

Social Security is broken. I’m trying to fund my retirement like it won’t be there so I don’t get screwed when I’m old and feeble (like 90 or something with no cash sounds awful). I’m really hoping the clowns in Washington can stop fighting with each other about nothing and fix it (eternal optimist). After all, I want my money back, and maybe then I can afford to live to 150 or something crazy like that.

25 livworld101

I am 21 years old, and I personally believe I will get nothing when I retire from Social Security. Most of my college educated friends believe the same thing. We understand we are paying into a broken system, and will get nothing in return from it.

As far as Social Security, I think that sometimes people have viewed Social Security as their safety blanket, and do not save money, and then want to retire. I have seen people say they are broke because they do not have enough from social security. When social security was introduced it was meant to take care of the elderly who otherwise could not take care of themselves. It was an insurance so that our elders could live a respectable life once they could no longer work. FDR’s intentions were not for people to consider it their only income after retirement. It has just morphed into that. Furthermore, the program was suppose to be temporary. No thanks to LBJ on that.

My conclusion: Take care of your own life, and don’t rely on the government to do so.

26 krantcents

Although I am 65, I will wait until I turn 70 to collect. I expect to collect Social Security, but My children may not. They are well on their way to financial independence though.

27 TTGOOD

I feel that it is really unfortunate that every time it gets some what heated on this blog – DN job with the government gets brought into it and he needs to defend himself. He works for the government and makes an honest living it really should not be an issue.

28 WinrWinrChknDinr

(2) 32yo DINKS here, and while we aren’t expecting SS in it’s current form, we are expecting that it will remain in one form or another. Maybe something along the lines of ~10% of its current rates when we are “of age”.

Perhaps we are too young to know exactly when it happened, but when did SS change from an income supplement to the sole thing that is going to provide for you in your golden years?

29 Melissa

OK, so maybe I’m just missing something here, but what is the big deal about social security? It’s just a government pension, right? You pay into it, and you get some back when you retire?

We don’t get Social Security here in Canada, but we do have the Canada Pension, which I understand to be the same thing. Of COURSE I plan on collecting my Canada Pension when I retire. I spent my entire working life paying into it. That money is mine, as far as I’m concerned. Now, I know it won’t be enough to live off of, so I’m planning on putting plenty aside to supplement it, but I don’t get this idea of “relying” on government support in old age. How is receiving a government pension relying on anything? If I didn’t work while I was able, I couldn’t collect it when I’m not.

So, really, what am I missing? Because some of you guys seem to be talking about it like it’s Welfare.

30 StackingCash

Re-read your post and the comments. Understand the miscommunication and realize that I can be too sensitive to your sarcasm and vice versa. Didn’t mean to flame, I regret my initial comment regarding your job and salary. There is a fine line between confidence and arrogance and I think we both might tend to cross it every now and then and butt heads. I hope they lead to better arguements than this one did.

31 StackingCash

debates rather than arguements :)

32 Ninja

Hey thanks for dropping back in. I much prefer the word “debate” to “argument”. Writing is definitely not my strongest skill-set and I know that my optimism can come off as apathetic and out of touch for some. I’ve never been any good at finding the proper balance between encouragement/pity. This is a topic that likely calls for both. Glad you can admit that some of your original comments may have been a little harsh, and I know too that I am not without fault.

Look forward to your continued contribution in the comments section. (Is it just me or did that sound very political?). What I meant to say is. Uh, thanks for stopping by, you’re a chill dude :)

33 Bgrizzled

Am I the only one that noticed this is a re-post from last year and it was deleted from the archives section?

It was titled: Social Security aint no breast milk

Yes maybe some of your newer readers have not read it, but passing it off as new material and then trying to hide it does not sit well with me.

It was be nice to at least include a disclaimer..

34 Ninja

Consider yourself disclaimed.

35 John

Don’t be so defensive Ninja or whatever your name is. You stick your views out here on a website for people to comment on and then jump the f@#$ all over them when they don’t agree with you or see the world through the same little rosy glasses you look through. Grow up. Your defensive stance = FAIL.

36 Ninja

This comment rocked my world. You sir are awesome

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