Is the Social Security System Bankrupt?

Will future retirees be a part of the largest renege by our elected officials? I am certainly not brave enough to address the political aspects of Social Security in a blog – so today – just the facts.  According to recent data from the Social Security Administration, in 2012 the maximum social security retirement benefit that could be earned by an individual reaching full retirement age (age 66) is currently $2,513 a month or $30,156 per year. Not a fortune, but you certainly wouldn’t pass it up.

As traditional pension plans go the way of the dinosaur, social security and personal investments are left to pick up your retirement income needs.  Although many folks discount the value of social security – the fact is that it provides a larger benefit than most believe (this is not to suggest that social security is a good or bad program – just that the retirement benefits can be significant). Assuming a life expectancy of 20-30 years past retirement age, the present value of the $2,513 a month income stream is roughly $670,000!  Thought of another way, if you needed to generate $30,000 per year from an investment portfolio for the next 20-30 years, you would require investments to the tune of $670,000 (assuming a 4.5% inflation adjusted withdrawal rate). 

As you can see, social security benefits can add up to a significant portion of your total retirement income.

In our next post, we will discuss when to take Social Security Benefits.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.