Is Social Security Really Disappearing?

Many Americans fear that it is. Are they right?

Maurie Backman
Maurie Backman
Jun 26, 2019 at 7:36AM
Investment Planning

There's talk of Social Security disappearing completely, and if that were to happen, it would spell disaster for the millions of retirees who count on those benefits at present and the millions of workers who are no doubt planning to fall back on those benefits once their careers come to a close. If you're worried about Social Security's impending demise, fear not: Though the program is facing some financial challenges, it's not in danger of disappearing completely. Still, it certainly pays to have a backup plan for your retirement so that you're not left short on cash if the picture of what Social Security looks like worsens.

What's happening with Social Security?

In short, the program is facing a funding shortfall that might force it to reduce scheduled benefits as early as 2035. This isn't a given, but because the program expects to owe more money in benefits than it'll take in revenue-wise, and because the program's cash reserves, or trust funds, are expected to run dry within 16 years, there may come a point when benefits get slashed by 20%, as per recent projections. Again, that percentage could change, for better or worse, as we creep closer to 2035.

Stack of Social Security cards

IMAGE SOURCE: GETTY IMAGES.

Either way, there's a real chance Social Security won't provide the amount of income you expect it to during retirement. Rather than let that destroy your plans for your golden years, take matters into your own hands by saving enough money to pay for the future lifestyle you desire.

Save now, struggle less later

If you're relatively young, and have a few decades left in the workforce, the good news is that you can easily work around a potential reduction in Social Security benefits by saving a nice chunk of cash on your own. The best part? You don't need to part with half your income to amass wealth (though the more you're able to save, the better). What you do need to do, however, is commit to saving consistently and invest your savings wisely to fuel your money's growth. For the most part, this means going heavy on stocks, because if you have a 10-year savings window or more, that's plenty of time to ride out the market's ups and downs and come out ahead.

Now, let's assume you have 20 years until you're planning to retire. Here's the amount of savings you might end up with if you invest heavily in stocks:

Monthly Savings Amount

Total Accumulated Over 20 Years*

$250

$123,000

$500

$246,000

$750

$369,000

$1,000

$492,000

*Assumes a 7% average annual return.Table and calculations by author.

The 7% return above is a couple of percentage points below the stock market's average, so it's a reasonable assumption for this sort of time frame.

What if you don't have 20 years until retirement? Delay that milestone as long as you can. Doing so will give you an opportunity to boost your nest egg, all the while leaving your existing savings alone.

It's too soon to tell what the future will hold for Social Security, but rest assured that it won't disappear completely in your lifetime. Still, it certainly doesn't hurt to plan for a reduction in benefits and to save enough to make up for it and then some.