How Secure is Your Social Security?

Some people collect baseball trading cards. Other people collect antique books.

I collect Social Security statements. Mine.

Yes, I am that boring. 

The oldest one I’ve got dates back to 2003, so I’ve got almost 20 years’ worth of Social Security (SSA) statements. But they contain my work records all the way back to the late seventies.

A lot has changed in my life and in Social Security over the four decades since I joined the work force. Here are just some of the things I’ve noticed by reviewing my Social Security Statements through the years.  

It pays to show up and grow up. The “Your Earnings Record at a Glance” section in my 2003 SSA statement tells me I first earned a taxable wage the same year I graduated from high school – 1977. I worked in the men’s department of a clothing store in the spring, then in a factory stacking sheet metal that summer. I made $1,175 for my part time efforts that year. 

My first year of full-time employment was 1983. By the time 2003 rolled around, my income had risen significantly. About ten times higher than the (very meager) income I earned my first year of full-time work. 

I find that many young people don’t realize how much their income will rise from their mid-20s through their mid-40s. It’s not guaranteed, but as you grow in the economic value you can bring to an employer, it’s not unusual to see that economic value rewarded through higher and higher incomes. 

Sometimes waiting is good. My 2003 SSA statement gave me an estimation of my benefits at “full retirement age,” which in my case is 66 years and 10 months. By the time 2020 rolled around, that projected benefit was 50% higher. Most of that increase was due to Social Security’s practice of increasing benefits by a cost of living factor.

And, the statement informed me, if I wait until age 70 to start collecting Social Security my benefit will be 26% higher still. 

This must be expensive. It is. One way to create guaranteed monthly income for yourself, similar to Social Security, is to purchase an immediate annuity. If you want an income of $2,000 per month and you want that income to increase with inflation, you will need to pay about $525,000 (based on current rates) to an insurance company.

But Social Security isn’t an annuity is it? It is a transfer tax. The 6.2% of income we pay as a tax, together with the matching 6.2% our employers pay, goes directly to someone who is already retired to pay for their Social Security benefit payments. 

Where have the warnings gone? My 2003 SSA statement contained this warning: “Changes will need to be made…in about 30 years, there will be nearly twice as many older Americans as there are today…in 2017, we’ll begin paying more in benefit than we collect in taxes…by 2041, the trust fund will be exhausted and the payroll taxes collected will be enough to pay only 73% of benefits owed.”

My 2010 SSA statement told me the date by which the SSA trust fund would be exhausted was 2037. 

My 2014 SSA statement told me that the trust fund exhaustion date was 2033.

By 2015, all the warnings were gone. They just took that section out. And it has not returned. 

I had to consult the annual report of the Social Security Trustees to get an update. They say the SSA will, “be able to pay scheduled benefits on a timely basis until 2034… At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 76 percent of scheduled benefits.”

Sounds like Social Security is less secure than most people image. Either taxes will have to go up, or benefits will have to come down. Or both.

Either way, it’s a good idea to keep an eye on your Social Security benefits.

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