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Question:


Why do I keep hearing that Social Security is running out of money? Everyone contributes to it on every paycheck. Should I worry?
-Maya


Answer:


Not everyone contributes to Social Security. Only people who work do, and there are fewer of them these days than there are in a healthier economy. One thing that’s healthier, however, is the human race. We’re living longer, which means we’ll be eligible to collect benefits longer. Fewer people paying into the system and more people collecting is a recipe for financial instability. That’s especially true when contribution rates were set at levels that were too low to begin with to pay retirees and others who collect benefits, such as people with disabilities. Social Security is solvent for the moment, but that could change as more people retire and even fewer work, something that’s expected in the next couple of decades.

When precisely the Social Security Trust Fund – which despite the name is merely a bookkeeping contrivance, not a ring-fenced pot of money – starts to shrink is hard to say. One or more developments could occur to forestall the event: contribution rates could be increased; the age at which people are eligible to collect benefits, now 67 for those born after 1959, could be raised again; benefits could be means-tested so that wealthier retirees receive less or Washington could do something weaselly like engineer higher inflation so that the benefits retirees receive have less buying power. Should you be worried? Yes, if you expect Social Security to be your primary source of retirement income. Instead of worrying, make sure you save as much as possible in a 401(k) or similar vehicle, starting right now.

-Conrad de Aenlle



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