Social Security: Replacing Less and Less of Your Income May 14, 2007Posted by pf in Expenses and Savings.
Today I came across an article from CNNMoney.com entitled “Shrinking Social Security”. While it’s certainly no revelation that Social Security is in trouble and those of us who are still quite far from retirement may not be able to count on it as a major source of income in retirement, the article paints a sobering picture of what we can expect in the future:
- Currently, Social Security accounts for 50% or more of the retirement income for 60 percent of retirees. As traditional pensions go the way of the dinosaur and our savings rates continue to be abysmally low, our dependence on Social Security is likely to increase while the actual amount of our income it is replacing decreases.
- Although Social Security is adjusted for inflation, Medicare premiums (which also come out of your Social Security check) are rising faster than inflation…thus taking an increasingly bigger bite out of the total income you will actually receive from Social Security.
- Social Security is taxable once your income exceeds $25,000 ($32,000 for those filing jointly). This is not adjusted for inflation, and so as your actual income rises with inflation, you will likely exceed this threshold by the time you retire (whether or not your actual purchasing power has increased).
So, what does this all mean for you and me? Save now…or reap what you sow…which won’t be much if you don’t plant the seeds of retirement now.