The ‘shortfall’ between Social Security and our retirement savings.

If you haven’t kept up with the ongoing clamor about the future demise of Social Security (SS), you need to mark a couple of dates on your calendar: 2033 and 2037.

A bit of background…

Somewhere in-between those two years the Social Security Trust Fund is expected to spiral into insolvency…”poof,” and no more checks to the 90% of the elderly who rely on its income stream.

It’s certainly no surprise that nine out of 10 of us over the age of 65 receive Social Security benefits:

  • 52% of married couples
  • 74% of unmarrieds are using it for 50% of their income.

A lot of us remain forever dazed-and-confused over the constant barrage of information spewing forth from the jaws of authority, like the Employee Benefit Research Institute (EBRI). Surrounding their reports are gloomy predictions about the fate of retirees falling into that infamous category of Retirement Savings Shortfalls.

Of course, such calculations fall within that noble purview called “proprietary models,” and in the case of the EBRI it’s best to take their word for it.

It’s difficult to wrap one’s brain around just how dramatically our retirement can be impacted with a shortfall, the gap between what SS provides and our other retirement resources.

The ‘shortfall.’

Again, our eyes may start to glaze over when anyone talks about “trillions” of anything. But the effect on us is more palpable when we see those numbers in relationship to our personal situation.

As such, when the EBRI tells us our total “national” retirement shortfall looks to be around $4.13 trillion, it’s more significant when they tell us it really amounts to:

  • $19,304 per individual/married households
  • $33,778 for single males
  • $62,734 for single females

Overall, 38% of the elderly’s income is taken care of by Social Security. That means it is crucial to have other viable income sources coming from 401(k)s, IRAs, Roth IRAs, or even income property (Today, that ‘shortfall’ is often reduced by working parttime in retirement, for example.)

A bleaker picture…

As in most forecasts, there are a lot of variables as well as many that remain constant. Consequently, the EBRI numbers were based on an assumption that our Social Security benefits would not be “reduced or eliminated” at anytime in the future.

But the Trust Fund, and hence our benefits, are horrendously affected when calculated on the premise that these benefits are “assumed eliminated in 2015.”

The percent increase is 88%, and raises the “aggregate deficit increases” to a whopping $7.87 trillion; this, from the EBRI’s initial calculations of a $4.13 trillion.

Concerns of ‘longevity,’ and ‘health care costs.’

Indeed, we seem to be living longer, which can certainly increase a the savings shortfall— the monthly gap between Social Security and what your savings is able to provide.

It’s a perverse reality to say that if you live longer you can count on running out of money, or at least widen dramatically that shortfall. But for those of us blessed with longevity, we are then ‘cursed’ at the same time: this group may experience a shortfall that’s “15 times larger” than those in the “quartile” classified as having the “shortest longevity.”

Things to consider.

Of course, we all hear how important it is to delay taking our Social Security benefits as long as we can; or, to continue working for a few more years to squirrel away as much as possible in our retirement funds. Or, if need be, find additional income from a part-time job during retirement.

More importantly, it’s paramount to start the conversation about planning for retirement early on. Part of the discussion should include a look at estate planning. Contact us today: we can advise you on the the ins-and-outs of elder care law, and retirement options.

Castle Wealth Group Legal in Media

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