August 14, 2010 marked the 75th anniversary of Social Security, and since then national political debate has been heavily focused on the future of the program. Democrats wish to paint themselves as the sole champions for the working and middle class by opposing Social Security reform and reviling Republicans who even suggest that seniors don’t deserve the greatest income benefit possible. Republicans are digging their heels into the facts and figures surrounding the fiscal folly of a government-controlled ponzi scheme doomed to fail. Paul Krugman’s inflammatory column in the New York Times1 calling conservative concern for the future of Social Security “nonsense” has fueled even more heated debate in the blogosphere and on social networking websites.

Everybody is concerned about Social Security these days.

Debthelp.tv reported in 2009 how an SSA press release revealed that “program costs will exceed tax revenues in 2016″ and “the combined assets of the Old-Age and Survivors, and Disability Insurance (OASDI) Trust Funds will be exhausted in 2037″. The current debate ensues over what these numbers really mean and whether or not Americans should consider Social Security to be stable and dependable or at a crisis status.

Unfortunately, very few economists and financial analysts are making mention of the fact that a heavy dependence on Social Security benefits is not prudent financial planning, regardless of the stability of the program.

The National Academy of Social Insurance released a brief in May 20072 confirming that American retirees are not receiving proportionate income replacement when they depend on Social Security for their livelihood. According to NASI, retirees need to replace 70-80% of their income in order to maintain their quality of life, but Social Security benefits only replace about 40%. Furthermore, most American retirees depend on Social Security benefits for at least 66% of their retirement income, with SS benefits accounting for 80% among seniors in the lowest wage earning bracket. Any retirement fund that replaces less than half of the pre-retirement income should be supplemental, not a primary income source!

Yet, Washington is consumed with taking sides on the issue of reform instead of educating the public on how to do more toward securing their retirement through sound investing, savings, debt reduction, and entrepreneurship or other income supplement. Financial literacy is the real issue here, and too many Americans are so busy arguing about and depending on Social Security benefits that they miss the truth about how well these benefits can actually sustain retirees.

In a related article I propose the following:

It is not the government’s responsibility to take care of me in my old age…That’s my job. All of the wisdom we learned from our predecessors has been thrown out the window – we don’t have to live modestly and below our means so that we can save for a rainy day. We no longer have to be prudent for ourselves because we no longer believe that the dynamics of life can swing the pendulum to the unfavorable side of financial stability. Americans think that employers, politicians, and institutions of various sorts exist to take care of them, not to serve a specific purpose within a limited scope.

Whose responsibility is it to plan for your financial future, and how heavily should anyone rely on government to secure their income replacement? No matter how you crunch the numbers, replacing income is hard work, and it would be wise not leave such a crucial function to the wits of elected officials who will retire well whether you do or not.

Sources:

1 Krugman, Paul, Attacking Social Security, http://www.nytimes.com/2010/08/16/opinion/16krugman.html

2 National Academy of Social Insurance (NASI), Social Security and Retirement Income Adequacy, http://www.nasi.org/

The best source of news and information about the future of Social Security is the Wall Street Journal.

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