The Social Security Dilemma & What You Need to Do

Social Security has been around now for over 80 years and has helped millions and millions of Americans live more comfortably in their senior years. But what about the future of Social Security? It’s something you learn about when you’re young, and like most people, think about it just occasionally until you draw nearer to the time when you will receive it. Although it was never designed to be the sole supporter of your retirement, it has become just that for millions of people. It’s now more than 50% of retirement income for the vast majority of all Social Security recipients.

The Social Security Dilemma and What You Need to Do

According to the Social Security Administration (SSA), 52% of all beneficiary couples and 74% of all beneficiary singles received at least 50% of their retirement funds from Social Security payments in 2015!  For 22% of all couples and 45% of all singles, Social Security is shockingly 90% of their retirement funds. Those numbers are growing every year. That is pretty scary.

The Trouble with Relying on Social Security

Think about this, you may not even be at the full retirement age when you need to start drawing your benefits whether you like it or not. Many people, over the past 10 years, have been literally forced to begin drawing their benefits because they simply had no choice. If you lost your job and were age 62 or older (62 for most is the first time you are eligible for these benefits), you may have had to begin drawing benefits because it may be your only available way to get any income at all. Older people seeking employment suffer from age discrimination (despite what the laws say), especially if they have other restrictions such as medical problems that will limit their appeal to an employer.

Currently, the average Social Security payment for an individual is less than $1,300 a month, and even less when you deduct your Medicare premium payment if applicable (currently $104.90 for most people). That brings the real income total to less than $1,200 a month. Do you feel like you can live comfortably on that? That’s about $40 a day per person and it’s even less money than my recent post about living on less…and that was illustrated for young and healthy people!

Consider this, average living expenses run a 62-year-old and older from about $1,650 a month to $3,400 a month depending on whether you own a home outright, rent your home or have a mortgage. Does it sound like a lot of people may be in trouble?

These statistics are the reason that so many advisors are worried about your retirement years. The golden years should be a time when you can relax, have fun, travel and think about your family and social life. If you are worried about what you are going to do about buying food, your medical expenses, your real estate taxes and the stress of limiting your social life because of money, then you probably didn’t prepare for your retirement properly when you had the chance. If you’re under the age of 62, you can still do something about it. But the younger you are the better off you will be. Do you want to be destined for tough times?

The Future of Social Security

Then it gets worse.

In 2015, Social Security paid 100% of benefits you are entitled to.
In 2025, Social Security will still pay 100% of benefits you are entitled to.
But in 2035, if nothing is done about Social Security, it will only pay 75% of the benefits you are entitled to.

That is just 19 years away from now, so if you are 43 years old or younger, you may be in serious trouble if changes to funding the system aren’t made. And that trouble can be for the rest of your life! Even if you are in your 50’s now, no solutions to the Social Security system or negative changes to it will mean you will be affected by it for years and years. You may wonder why this is happening and what can be done to fix it.

Reasons for the Dilemma

There are 4 major trends that have led us to this problem:

  1. People are living longer than ever so the payments last longer and drain the account faster.
  2. The demographics of our country are changing as the baby boomer generation collects more and more and the population of workers has declined due to the birth rate and extended periods of unemployment which don’t replace the dollars drawn.
  3. Payout trends haven’t keep up with the real cost of living  for our workforce and prevented payroll from keeping monies rolling in as needed.
  4. People are just uninformed and depend on the system instead of finding alternative sources to fund their retirement.

Proposed Solutions

There have been a number of proposed solutions on both the benefit and revenue sides of the equation. They can be used individually or in combination.

For Benefits

  1. Permanently reduce Social Security benefits for all (negative)
  2. Increase the age you can collect your benefits to 68, 69, or 70 (negative)
  3. Eliminate and/or re-calculate cost of living adjustments (could raise or lower the benefits)

For Revenue

  1. Increase the taxable amount of income from its current $118,500 maximum (positive)
  2. Tax all income on a increasingly graduated scale like income taxes are done (without deductions or exemptions) and use that for a new Social Security tax
  3. Privatize the Social Security funds and invest them (currently the monies are directed to a trust fund which is self-supporting and uses only the Social Security funds collected from your payroll)
  4. Apply the Social Security Tax to 401k’s and other retirement plans to increase the pool of money available (negative)

And lastly, we could do nothing and let the next generation, 19 years from now worry about it (very negative!).

Most people don’t know that the Federal government does not fund Social Security. It is administered by the SSA, a government agency, but all of the monies used are collected by a dedicated payroll deduction tax and are used only to support Social Security and its benefits. The government itself contributes nothing.

What You Need to Do

This makes planning and getting you individual retirement plans in order so critical. Now is always the best time to make your plans, review your plans, and re-commit to your plans. When your earned income stops, it will be far too late to do anything about it. The real danger is if you won’t save on your own, nothing may be done to improve the situation with Social Security.  During the time remaining in the current congress, nothing will happen. That means the discussion for 2016 is over simply due to the combination of large disagreement on how to solve the problem and the upcoming Presidential elections. There are some things that you should and can do before November’s election.

Number 1, if you don’t have a self-directed IRA or you don’t participate in a company offered 401k right now, you must find a way to do so. If you’re 21 or 61, do it right now. The sooner you start and the longer you maintain it the better off you will be. If necessary, seek out professional help to find the best plans offered. But frankly, you can do it yourself. Read about the many options and recommendations in previous blog posts.

Number 2, before you decide on for whom to vote, it’s imperative to find out what the position of your candidates is for house and senate, and even president, on the Social Security dilemma.  Do they have a plan or support one? Do you have a suggestion for what should be done? Find out their stand and make sure it’s what you want them to commit to. If you want to make sure your politicians are paying attention to Social Security, head over to AARP’s Take a Stand. If they want your support, let them know that this is important to you and the future. I’m not voting for anyone who doesn’t support keeping Social Security viable for me and all future generations.

Where are you on your own retirement plans? Are you concerned about Social Security and how will you live with or without it in your retirement?


  1. A great overview Gary. Social Security is not something I’m personally counting on for my future. It will be a nice bonus whatever amount I may receive. I think that they best way to approach it at this point. Plan for the worst case, and if it’s there when you retire, bonus! My mom currently collects SS as one of her streams of income and I know over the last few years her cost of living adjustment has been under $25 per year.

    1. It may be a wise strategy to make the assumption that SS will not be there for you, or at least the way it has been there for over 80 years. Planning alternative sources of retirement income will definitely help you be self-supporting after retirement and if SS is paying, that will just be bonus money. I have found a lot of people, especially Millennials, are saying they don’t expect much from SS when they retire. I’m hoping that they’re wrong and we’ll all be pleasantly surprised.

  2. Emily @ JohnJaneDoe

    Good job of laying out the issues, Gary.

    I know I’ve only been thinking about Social Security for a few years. We’ll have a big decision to make when Jon turns 62. Taking Social Security early means a reduced benefit for him, but we’d be able collect additional amounts for several years because our daughter will only be 11. Of course, they’ve been closing loopholes like file and suspend, so that may not be an option.

  3. Lindsay @ The Notorious D.E.B.T.

    Great post. I wish more young people my age would take retirement seriously and start saving more, even if they’re in a world of debt like I am.

    Most of my peers think social security will fully take care of them, so my favorite tactic for trying to impress upon people the importance of saving is telling them how much social security payments really are (i.e., $1200/month). That usually perks their ears up a bit.

    1. Thanks, Lindsay, you seem to be very up-to-date on what needs to be done. That’s a great tactic telling people how much the payments typically are. If you can get your peers to start thinking about saving now, they will have decades to prepare for retirement with or without SS. I’m working as hard as I can to make sure that SS will still be around when you retire.

  4. Miss Thrifty

    Great points, Gary! I wish more would view SS as merely a supplement to their retirement savings. I’m wearing of counting on a system, 45 years from now when I’d be eligible, that looks like it’s in such disrepair even now! I’m happy to have years ahead of me to read the writing on the wall and make a plan to save for myself.

    1. Miss Thrifty, it certainly is advisable to prepare for retirement with your own alternative sources of support. The good news is that time is definitely on your side to accumulate the wealth you’ll need. But don’t give up on SS, there are many people including myself, that want to make sure it will be around when you need it in the future.

  5. President is important, but I’m glad you included researching the legislature, too. Not as sexy of a political topic, but maybe an even more important one to research. I’d also check up on state legislators and judges for an array of reasons, but relevant to this post is the fact that they’re likely to make major decisions about state pensions which are by and large in trouble, too.

  6. Mrs. CTC

    We’ve had a major social security overhaul in the Netherlands a little while ago. The retirement age was raised and other benefits were stripped or cancelled altogether.

    This was actually one of the reasons I started reading into early retirement, you shouldn’t be dependent on the rules and rights as they exist today.

    1. You’re so right, Mrs. CTC. Preparing on your own terms for your retirement is something that you definitely have control over. And there’s a lesson to be learned regarding keeping up to date and involved with the lawmakers so that they don’t take away something that you have thought of as a lifeline for your old age. Unfortunately, it’s a danger and a risk that no matter where you’re from, you may face.

  7. Jack

    Last I checked, it was 3 workers supporting each SSI recipient, and getting worse due to the demographics you mentioned.

    The sad thing is, we’ve all been paying into the system whether we want to or not, but the younger you are, the less likely it is you’ll ever receive that money back. Even worse, no one seems that upset. I suppose government is just supposed to take your money and give you nothing in return…

    1. Jack, while you’re summary is fairly accurate, don’t give up. If you plan your own destiny by having alternative sources of income for retirement and you keep a watchful eye on your elected politicians in Washington, you can prevent the potential disaster that may be awaiting the SS system. Thanks for your comments.

  8. Pia @ Mama Hustle

    Right now, I’m planning on social security not even existing by the time I retire. I’m only 25, so I’m privileged to be able to act that way. I’d definitely be more concerned if I was in my forties. I figure, worst case scenario, it doesn’t happen, and I still have enough saved. Best case, it’s the cherry on top of our investment portfolio.

    Thank you for writing this. I think SS is something that doesn’t cross most peoples’ minds frequently, unless they’re already older. It’s definitely something young folks need to think about to, especially during election times.

    1. It’s very refreshing for me to hear what you had to say. You are definitely right on target with your approach and thoughts about retirement. If you can spread the word among your peers that they should occasionally look and think about their future and SS, they will be better off and you will be doing a service. Thanks for your comments, Pia.

  9. I’d strike privatization off the list. As I understand it, we did that under Dubya and the results were disastrous. It actually worsened the financial problem because it lost a bunch of money.

    May just be the knee-jerk liberal in me, but I think we need to nix caps on income. It’s not a full solution, but it’d definitely help! There are a fair number of people out there (or an unfair number, depending on what side of the fence you’re on) earning more than $118,00 a year. For each person earning $200k, that’d be an extra $12,546 a year going into SSA — that’s about half a year’s worth of one person on the average benefit.

    1. Abigail, you have a strong conviction about what should be done and I believe you should make that conviction known to your local and national representatives. The problem that I see is that we’re just not talking about it at that level and what may happen is absolutely nothing. And that’s my worst fear.

  10. Hey, Gary. Awesome overview of our predicament. Part of the problem is demographics and medical technology (fewer workers, more retirees). But an equal part of the problem is cultural. We don’t save, we can’t moderate our consumption of sugar, alcohol, and nicotine, and we don’t have the grit to endure the slightest hardship. So given these cultural traits, it’s very hard for Congress to fix Social Security (or anything for that matter). In other words, Congress knows what needs to be done, but we’re not culturally strong enough to handle the medicine. The question before us then is this: is there enough time for us to turn things around culturally before Social Security begins to break down? My bet is no. Plan accordingly young people.

    1. Mr. Groovy, forgive my reference to a 1960’s tune, but “live for today” is the philosophy of many people who just don’t want to think about their future. The fact that congress can’t seem to get anything done is another issue. So the bottom line is you’re right, waking up the youth of America to start thinking about saving and retirement, even at a young age, is critical. And then finding the right people to represent us is something we all can try to do. That is something I’m going to focus on.

  11. “Sha-la-la-la, let’s live for today.” I believe that line came from the Grassroots. I could be wrong. Excellent point, Gary. I like the way your mind works. It won’t be easy, but we could do a better job of selecting our representatives. Between that and a little self-improvement gone viral, we might just be able to turn things around. I got my fingers crossed.

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