Should Social Security be Part of Your Retirement Planning?

Should Social Security be Part of Your Retirement Planning?

You’ve been faithfully putting money into your IRA/401(k) for a number of years now. Over time, you’ve built up a fairly substantial nest egg, but you’re not sure if it will be enough to carry you through your retirement. But that’s no big deal. At age 66, you can collect your full Social Security benefits as well, providing you with a nice monthly supplement to your savings, right? Well, no. If Social Security is part of your retirement planning, you need to rethink your strategy immediately.

The End of Social Security

Economists and financial advisors have been talking for decades about the depletion of the Social Security fund. Now that Baby Boomers are entering retirement, the people collecting benefits greatly outnumber the people paying into Social Security. Eventually the fund will be tapped out. We tend to think of it as someday in the far future, when our children are getting ready to retire. But according to the latest Social Security and Medicare trustees’ annual report, that date is a lot sooner.

According to the Administration’s own report we have less than twenty years; by 2034 Social Security will be tapped out. Now, this doesn’t mean the checks will stop entirely. The workforce of 2034 will still be paying into the fund, allowing you to collect benefits, but they’ll be significantly reduced. There will only be enough money coming in to pay an estimated 79% of promised benefits.

The term Social Security actually refers to two separate funds: one for retirement benefits and one for disability benefits. If you combine the two, they’ll be depleted by 2034. If you take them separately, then the retirement fund will likely last an extra year. However, at that time, benefits will be reduced even further, to just 77% of what was promised. Meanwhile the disability fund, taken on its own, would be depleted in just 7 years, running out in 2023 and thereafter paying only 89% of promised benefits.

Protecting Yourself for the Future

The good news, if you can call it that, is that at the moment this is just the path Social Security is headed down. Since we know what’s coming, some major policy changes could change the way we handle the funds and potentially make the benefits more stable for the future. Of course, that’s assuming we enact those changes in time, and they have the desired effects. But particularly in an election year, it’s impossible to know what those policy changes will end up being, much less the effect they’ll have over the next eighteen years.

In the meantime, the smart thing is to reformulate your retirement plan so that it doesn’t rely on the supplement of a monthly government check. Start putting money into something more stable that will increase over time, rather than depleting. While stock investments have the potential to build up your portfolio, they’re increasingly risky in today’s economic climate. Another market crash like the one in 2008 could cut your IRA/401(k) in half, leaving you in dire straits, and a decade closer to retirement. Even bonds, which have always been considered less risky than stocks, have been losing money lately.

So how can you pad your retirement fund and protect yourself against the impending end of social security? You need a stable, physical asset with intrinsic value, like gold. Unlike the fluctuating markets, the precious metal maintains its value over time. By investing in physical gold, you can not only keep from losing your nest egg, but also expand it over time. Having the extra monthly check from the government would still be nice, of course. But when Social Security does peter out, you want to make sure it’s not a crushing blow to your financial security.

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