Social Security Benefits: Will They Be There for You?

social security benefits

As a financial consultant, I often get asked about social security benefits and whether or not they will be available when it’s time for retirement. With so much uncertainty surrounding the future of the program, it’s no wonder people are concerned. So, let’s dive into the history and current state of social security benefits to help you understand what you can expect in the future.

A Brief History of Social Security Benefits

Social Security was established in 1935 by President Franklin D. Roosevelt as part of the New Deal. Initially, it was designed to provide benefits for retired, unemployed, and disadvantaged Americans. Over the years, the program has expanded significantly, with amendments adding child, spouse, and survivor benefits, as well as disability insurance, Medicare, and Medicaid.

How Social Security Benefits Are Calculated

Understanding how social security benefits are calculated can be quite the mathematical adventure. Your benefits are based on your income, the year you were born, and the age you decide to start receiving benefits. The calculations involve your top 35 earning years, adjusted for inflation, which are then divided by 420 (the number of months in 35 years).

The result is your average indexed monthly earnings (AIME). From there, a bend point equation is applied, which gives you a higher percentage of your salary the less money you’ve made. This is designed to help low-wage retirees.

Factors That Affect Social Security Benefits

Two significant factors can affect the amount of your social security benefits: cost of living adjustments (COLAs) and the age at which you start receiving benefits. COLAs are annual increases in benefits designed to help keep up with rising prices. By waiting to claim benefits until after your full retirement age, you can increase the amount you receive each month.

The Social Security Trust Fund

Social Security is financed through a dedicated payroll tax. Every working American pays 6.2% of their wages to the government, up to a certain limit, which is then matched by their employer. This money goes into the Social Security Trust Fund, which is invested in interest-bearing Treasury securities.

However, since 2010, Social Security’s cash flow has been negative, meaning the agency isn’t collecting enough money through taxes to cover what it’s paying out. With people living longer and the baby boomer generation retiring, the trust fund is expected to be depleted sooner than anticipated.

Possible Solutions to Preserve Social Security Benefits

There are several options that Congress has at its disposal to address the issue of Social Security’s solvency:

  • Raise taxes: Increasing the payroll tax rate or the wage base that the taxes are applied to could help generate more revenue.
  • Reduce benefits: Cutting benefits, either across the board or for certain groups, could help to balance the program’s finances.
  • Invest in the stock market: Allowing the trust fund to invest in stocks could potentially provide a higher rate of return, though it would also expose the fund to market risks.

What Does This Mean for Your Social Security Benefits?

While the future of Social Security is uncertain, it’s important to remember that even if the trust fund were to run out completely, the program would still be able to pay out a portion of the promised benefits. Lawmakers are likely to take action to preserve the program, but it’s always a good idea to have a diverse retirement plan that doesn’t rely solely on Social Security benefits.

So, will social security benefits be there for you when it’s time to retire? It’s hard to say for certain, but it’s wise to plan for a variety of scenarios and not put all your retirement eggs in the Social Security basket.

Building a Diverse Retirement Plan

To ensure a comfortable retirement, it’s crucial to have a diversified portfolio that includes investments, savings, and other income sources. Here are some options to consider:

Employer-Sponsored Retirement Plans

Participate in your employer’s 401(k) or 403(b) plan, if available. These plans often come with employer matching contributions, which is essentially free money. Don’t leave it on the table!

H3: Individual Retirement Accounts (IRAs)

IRAs, such as Traditional and Roth IRAs, offer additional avenues to save for retirement with various tax advantages. Determine which type suits your financial situation and take full advantage.

Health Savings Accounts (HSAs)

For those with high-deductible health plans, HSAs can provide a triple tax advantage: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.

Real Estate

Investing in real estate, either through rental properties, flipping foreclosed homes, or real estate investment trusts (REITs), can generate additional income during retirement and help diversify your portfolio.


Annuities can provide a guaranteed income stream for a specified period or even for life, giving you additional peace of mind.

The Bottom Line on Social Security Benefits

Although the future of Social Security benefits is uncertain, there are steps you can take to prepare for a comfortable retirement. By diversifying your retirement plan and exploring various income sources, you can ensure financial stability regardless of what happens with Social Security. And remember, is always here to help you navigate the complex world of retirement planning. After all, a well-planned retirement is a happy retirement!