We have all read about some of the funding issues that Social Security will be facing in the not so distant future. No, Social Security isn’t going away and it won’t be bankrupt in 2034. What will occur barring any Congressional action is there will be a funding gap in or around 2034. The reason we are being vague is that year changes a bit depending on the economy, employment, and the money moving into the Social Security Trust.
For those retirees, near retirees, or current workers (just about everybody), the numbers don’t look great. If there isn’t a change, Social Security will be able to pay out approximately 77% of current promised benefits. If you have gone to My Social Security and taken a look at your statement, you will notice a few telling items: 1) On page one it clearly states that Social Security is not intended to be your only source of income in retirement, 2) On page two, it notes that benefits are based on current law and the law governing benefits amounts may change!!!
What this means for 457b, 401K and 403b savers is you need to save a lot more. You not only need to make sure you are on track to replacement your income when coupled with Social Security, you also might want to provide a 23% buffer to the upside. The fix to Social Security could be any combination of things but it likely will mean higher taxes, lower benefits, means testing, increasing the taxeable wage based, or some combination of all of those items. At the end of the day you want to make sure you are saving aggressively, keeping money in your plan, rebalancing assets, and increasing savings over time.