Can I Rely on Social Security for My Retirement?

"Will I pay social security tax if I continue working after my full retirement age?" The short answer is YES, and you will pay a lot of it.

"Will I collect social security if I retire 15 or more years from now?" The short answer is YES, but not as much as you should.

The social security tax was first imposed in 1938 at the rate of 1% of the first $3,000 of earnings per year ($30). It was imposed so that widows and children didn't starve if something happened to the breadwinner of the family. It was never intended to be a "retirement fund" per se, and it was based upon actuarial data for life expectancies known on the date of its imposition. Of course life expectancies have lengthened substantially since then, and the tax has grown to 6.2% of your earnings on the first $132,900 of your income (2019). Of course, your employer also pays 6.2% tax on your wages. That is a total of $16,478.60 for this year. This is a 55,000% increase in amount. If you are self-employed, you will pay the entire 12.4% yourself.

The wage base to which the tax applies is expected to rise to $191,100 by 2028. Even with those expected raises, the Social Security Administration projects that the social security trust fund (there really is not such a fund set aside for you individually) will be insolvent by 2034. The best estimate today is that you will receive a cut of 23% of the amount which would otherwise be due from social security. So for someone who would receive $2,000 per month this year, he/she will receive only $1,540 in 2034. Of course, that is only a projection.

The bottom line for future retirees is that social security will probably not be nearly what you expected it to be for retirement payments. I don't call them "benefits" because the money that social security has frittered away is YOUR money which it has had in its possession over your 20-40 year working career. The take away advice is DON'T rely on social security for your retirement. Invest in IRAS, 401Ks, and any other form of savings. This will be needed by you in your retirement.

Grayson P. Van Horn is an attorney at law serving Oklahoma residents and property owners. 

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