Tuesday, May 19, 2009

My Future Without Social Security

I was cleaning off my desk this past weekend when I found my March 2009 Social Security Payment buried underneath piles of junk mail, old bills, magazines, etc. In looking at the Statement, couple of things really depressed me.

Depressing Thought #1
The only thing I find useful or remotely interesting in the Statement is a snapshot of my earnings history. I always took great pride and pleasure in seeing how my income always went up and up. I suspect that when I get laid off from my current job, this upward trend will break.

Years I Worked

My Taxed SS Earnings

My Taxed Medicare Earnings

1989

$4,348

$4,348

1990

$6,720

$6,720

1991

$5,254

$5,254

1992

$5,636

$5,636

1993

$13,290

$13,290

1994

$18,130

$18,130

1995

$16,246

$16,246

1996

$0

$0

1997

$2,055

$2,055

1998

$10,580

$10,580

1999

$42,234

$42,234

2000

$54,583

$54,583

2001

$61,953

$61,953

2002

$70,315

$70,315

2003

$87,000

$90,223

2004

$87,900

$95,579

2005

$90,000

$101,032

2006

$94,200

$107,649

2007

$97,500

$111,295

2008

$102,000

$117,063



But ironically, I think my happiest years were when I was earning the least (with the exception of when I was attending law school between 1995-1998). I may not have been earning enough to buy or do much, but I definitely had less stress then. I'm sure this is mainly because I didn't have the onerous debt back then that I have now. It never fails to amaze me the crushing effect debt can have on one's soul. Perhaps when I'm debt-free I wouldn't care how much I made.

Depressing Thought #2
I don't pay attention to the rest of my SS statement (particularly the estimated benefits section), since I truly believe that I won't be receiving any benefits from Social Security and/or Medicare when I retire. After all, the Trustees estimate that the SS trust fund will be depleted by 2037 and the Medicare trust will be exhausted by 2017.

I guess I'm really depressed about this since:
  • My tax payments have (and will continue to) subsidize others, but when it's my turn to retire, I may not see a lick of it.

  • My 401k administrator has implemented an "advice and planning" program. In this program, I'm asked whether I want to take into consideration my "estimated" SS benefits.

Here's the difference in my projected retirement income between receiving Social Security benefits and not receiving Social Security benefits:


Without Social Security Benefits



With Social Security Benefits


A marked difference, eh? I'm depressed at the thought that I'm contributing quite a bit towards my retirement now, but I may have to live at poverty-line in retirement.

For example, I contributed $19,993 into my 401k last year (including company match). I'm on track to contribute much more this year. I've also started purchasing I-bonds ($25/month) and I've started contributing $50/month into my Roth IRA.

Keep in mind that in 23 years, $1 is only worth about 40 cents today, assuming 4% annual inflation. So without Social Security benefits, I basically have a 70% chance of having a $44k/year lifestyle in 23 years which is the equivalent of living on approximately $18k/year now!

I never expected to live high on the hog in retirement, but I never thought I would have to scrape-by even with so much effort now. Am I the only one who is worried sick that she or he may not have enough to comfortably retire?

8 comments:

Money Beagle said...

I think Social Security and Medicare will be there in some fashion by the time we retire. The problem is that the government, as big as it is, can really only deal with one big problem at a time. Unfortunately the Social Security and Medicare issues have never risen to the top of the list. Eventually they will and it will be some campaign issue and something will get done. Albeit, that will happen at a much greater cost than if they had just done something about it 20 years ago when they should have, but that's beside the point.

Still, I usually end up doing most of my calculations assuming that Social Security won't be there, and yes, that's extremely grim.

Moving on up! said...

I don't make very much money so I know I won't have a great retirement. I cried one day when I realized I problem could never have enough. I'm just doing the best I can!

Ms. MoneyChat said...

oh yeah, that's a downer for sure. i'm not counting on social security either. hopefully i will be completely debt free in retirement (including mortgage). if this is the case, my living expenses may actually be lower at that time. a girl can dream can't she?

Over the Cubicle Wall said...

I am planning on a low cost retirement for the most part (18k a year would be extravagant1!), but I am like you, I am not counting on Social Security.

There is a ray of hope for the generation after the baby boomers (gen x) because it is relatively small compared to the generation behind it. If SS can remain solvent through the lifespan of the baby boomers, the gen x folks should have it made. That is just more proof that the whole thing is a giant Ponzi scheme.

The Lost Goat said...

I consider my "retirement" accounts to be my end of life accounts. It's my hope that they will hold out through my last debilitating illness that does not allow me to hold down a job. I see no future in which I will be able to retire .

Abigail said...

I hate to be a broken record, but I really think all this doom and gloom about SS/Medicare is overdone.

I guess it certainly can't hurt to plan on not having Social Security. Because if you're right, you're already on track. If you're wrong, pleasant surprise!

But there was a good MSN Money piece about why the most recent report is probably not accurate. Also don't forget that, like any program in trouble, Social Security has a vested interest in making things sound bad, so that funding comes through/appropriate changes get made. Squeaky wheel gets the oil and all that.

Here's that article, in case you want a different perspective: http://blogs.moneycentral.msn.com/topstocks/archive/2009/05/13/the-great-social-security-and-medicare-panic.aspx

Shtinkykat said...

I'm a pessimist in nature since I can't imagine nothing worse than believing there's a pot of money and turns out there's none. I'm imagining that if SS survives by the time I retire, the gov't may implement a means test. I still think it's better to mentally prepare as though there'll be none.

Anonymous said...

It is very interesting for me to read this post. Thank you for it. I like such topics and everything that is connected to this matter. I definitely want to read a bit more on that blog soon.