Race To Retirement
While you know Social Security is in trouble, it's harder to
know what you should expect -- namely, dollar amounts -- from the
Sure, the Social Security Administration provides an estimate
for what you'll get when you reach full
, suggest not getting too caught up in all these guesses. He
questions their strategic value for anyone deciding on what they
Tresidder recommends planning to receive 0% to 30% of your
retirement income from Social Security. Americans in their 20s
and 30s might want to go ultraconservative and plan on zilch, he
says, while those closer to retirement can focus on the high end
of that range.
"If you're young, you're far better off to assume zero," he
told IBD. That gives you "a little wiggle room," and whatever you
get can be "bonus money."
What are those other government estimates? Well, the
Congressional Budget Office says that on average, someone
retiring today at 65 will receive 43% of his average annual
income. For the top 20% of earners, it'll be 29%, while for the
lowest 20%, it'll be 71%.
However, the Social Security Administration said last April
that its trust fund would run dry in 2033.
So people in their mid-20s to early 30s (i.e., born in the
1980s) should expect to receive 35% on average, the CBO says, not
the 41% of their average annual income that they'd been scheduled
to get. For the top 20% of earners, it'll be 24%; for the lowest
20%, it'll be 60%.
What if you want a second opinion? Social Security
Administration actuaries show other scenarios based on a plan
developed by the Simpson-Bowles fiscal commission. Many see that
2010 report as a more realistic take on how Social Security
benefits will shrink.
These actuaries say high earners born in 1980 and retiring at
67 in 2047 will receive 34% of their average annual income;
medium earners, 41%; and low earners, 55.3%.
The commission defines a higher earner as someone making 160%
of the average, while low means 45%.
Again, Tresidder cautions against putting too much stock in
He says even if you're in your mid-60s, keep in mind that you
have a chance of living into your 90s. A lot could happen to
Social Security over the next 30 years.
Tresidder added that he's not a "gloom and doomer on Social
Security." It's not realistic to think that politicians would let
the system vanish, he said. "But to say that its purchasing power
in real terms is going to get diminished through every mechanism
that they can legally pull off is totally real. It's already
happening. And to say that means-testing is a potential next step
is also politically palatable."
Means-testing refers to checking whether individuals have
resources sufficient that they don't need assistance. Critics say
that approach would discourage savings.
Don't forget that benefits reach a maximum. A worker who
retired at age 66 in 2012 faces a cap of $2,513 a month.
Waiting For More
Also remember: You'll receive more from Social Security if you
delay collecting. Someone who's 66 today could see her benefit
(dubbed the Primary Insurance Amount) go up by 32% if she waits
until age 70 to begin receiving it.
It might seem like it's best to delay and maximize your
benefit, but Tresidder noted that you get only so many years when
you're active: "This is about a fulfilling life, not just that