There are those who believe that workers now in their 20s and 30s will not have Social Security to rely on when they reach retirement age.
“Well, they’re wrong,” said John Trollinger, deputy press secretary for the Social Security Administration.
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A recent report by the Social Security Board of Trustees indicated the Social Security trust fund won’t be depleted until 2034 – or two years later than they predicted last year. Improved conditions for the trust fund are the result of the nation’s currently healthy economy, lower unemployment rates, higher wages, and lower inflation, according to the report, which was released on March 30.
That report doesn’t mean, however, that Social Security benefits will “disappear,” Trollinger explained. It indicates that once the year 2034 arrives there will only be enough money to pay eligible people 71 percent of their benefits, or 71 cents on the dollar, he said.
The six member Trustees group – which includes the Secretary of the Treasury, Secretary of Labor, and the Social Security commissioner – recommended in the report that Congress and President Clinton take action soon to restore long-term balance to Social Security.
“The longer run financing problems of both Social Security and Medicare need to be addressed soon to allow time for phasing in any necessary changes and for workers to adjust their retirement plans to take account of those changes,” the Trustees said in a report summary.
The summary continued: “In this regard, we are encouraged by the high priority the President and the Congress are giving to the resolution of the Social Security program’s projected long-range financing shortfall. We strongly recommend that similar urgency be attached to the task of addressing Medicare’s long-term financial situation.”
Kenneth S. Apfel, the Social Security commissioner, issued a statement on the report emphasizing his commitment to keeping Social Security “a rock-solid benefit that current and future beneficiaries can count on.”
The Trustees report, he further indicated, found that Social Security tax revenues will exceed expenditures until the year 2014, which is a year later than thought in previous reports. At that time, it will become necessary to use interest income to meet the fund’s obligations.
But despite the apparently good news that the Social Security fund is solvent for two years longer than previously expected, some local financial planners advise workers to be conservative when they begin retirement planning and projecting how much money they’ll get from Social Security benefits.
“Many people don’t believe it’s going to be there (when they retire),” said Rick Misbin, president of Capital Financial Advisors, Inc., in Cranston.
Though it is hard to predict what will happen to the program in the future, Misbin said there will definitely be changes. “Maybe they’ll push back ages when people can collect wages,” he suggested.
There are a number of factors that have contributed to the expected Social Security shortfall, said Misbin, who founded his company in 1964. Among the reasons he cited: longer life expectancy for workers, earlier retirement ages, fluctuations in the number of workers paying into the Social Security fund, and the government being able to borrow some of the money for other purposes.
The Social Security Act was passed in 1935 with the goal of helping American workers support themselves after retiring. It is the one source of retirement income that a worker, man or woman, cannot outlive, according to Social Security officials. Congress has expanded the law several times, including passing provisions allowing for disability benefits and payments to surviving family members upon a worker’s death.
“It was originally set up that the average person was only living three or four years after collecting Social Security,” Misbin said.
Among the groups that have greatly benefited from Social Security are women and minority groups, according to Social Security Administration reports.
Unmarried women, including widows, ages 65 and older typically receive 49 percent of their retirement income from Social Security. On the other hand only 37 percent of a typical unmarried man’s income comes from Social Security, and the average married couple receives about 34 percent of its income from the fund.
Without Social Security, reports indicate, the poverty rate for elderly women would increase from 13 percent to 52 percent.
Sixty-two percent of elderly African-American retirees would be under the poverty income line without Social Security, while 61 percent of retired Hispanic-American citizens would fall under that line.
Only 32 percent of retired African-Americans and 20 percent of retired Hispanic-Americans receive pension income, as compared to 43 percent of retired white Americans.
William Howe, who founded The Howe Group in Coventry four years ago, said he has clients consider their Social Security benefits when they are choosing a retirement savings and investment strategy. “At the same time, I very much talk to my clients about the uncertainty of what Social Security will be like.
“It’s like everything else in the world – not certain. It’s good to be aware of what’s going on when you’re old it’s hard to make up for mistakes,” Howe said.
“I think it’s important to be conservative. I think it’s likely Social Security won’t cover as much of retirement for future generations,” he added. “It’s important to assume less than more when you’re planning. If you suddenly find you calculated too optimistically in your planning, you’ll be very unhappy.”
