Is Social Security Going to Disappear?

"Social Security is going away and it's not going to be around by the time I retire."

"Congress doesn't want to keep it going, so I'm never going to be able to retire."

"I'm entitled to that money, why does the government insist that that I work longer or give them MORE?"

Nothing annoys me more than people, in particular news anchors and other in the media, talking about Social Security in a way that is meant to scare people. These people don't understand how the system works at all, nor do they understand that the system itself will not collapse completely, but there will be some pain felt. I will let you know some facts about Socially Security that I hope you will dispel to your family, friends and colleagues...

FACT: Social Security is NOT an entitlement program.

The money you contribute to Social Security is half contributed by you and half by your employer. It's going into a pool today, to pay for people who are already retired. If it were a real entitlement program, then the government would take the exact money you paid in and would set it aside for you. That is not the case; the system is capped at a certain amount and it is designed to skew more favorably for those with lower incomes who otherwise would never be able to save for retirement. If you toss money into a bowl with a bunch of other people, there's no way to know what is yours.

FACT: Social Security is not going to completely disappear.

Just about every developed nation on Earth and then some, offers some form of financial retirement benefit to its citizens, and that will always be the case. Nowadays, there are more Baby Boomers retiring and requiring Social Security than there are Millennials able to fund the system, and the deficit will be made up with the help of a surplus pool. However, it is expected that this pool will be depleted in the next 20 years or so. That doesn't mean the program will seek to exist -- just like if you run out of money in your bank account you don't just all of a sudden quit everything. Instead, you look to get more money to make up the difference. Inevitably, Congress with either a) increase payroll/income taxes or b) increase the age of retirement, or some combination of the two. The program will keep going, but it will cost people.

FACT: Rich Americans can actually opt out of Social Security, which can also keep the program going longer.

Rich Americans with plenty of money already saved for retirement can also opt out of Social Security in order to help the program save money. In return, (because there has to be a trade off) the IRS will allow these individuals to make tax-free contributions to a Roth IRA. Ultimately, they will pay no taxes at all on their retirement contributions. It may not be enough to keep Social Security at the current levels, but it's not going to disappear.