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Social Security And You- Myths And Truths

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Most Americans, no matter what their age, have more questions than answers when it comes to Social Security. Here are a few myths and truths you may want to know whether you're 25 or 65.

Social Security was established in 1935 to fight against the poverty within the elderly population caused by the Great Depression. It was created as a self-financing program meaning it would collect payroll taxes from workers and their employers to be paid out in the future to retirees.

The self-financing strategy works well when each generation is approximately the same size, but the cause for all the current buzz about Social Security being broke is a result of a huge generation -- you may have heard of them -- the Baby Boomers -- moving through society. With 78 million Boomers paying into the system during their working years, the trust fund that manages the Social Security funds expanded to over $2 trillion.

Although there is a lot of speculation that Social Security won't be there when you retire, the 2008 annual report from the Trustees of the Social Security and Medicare Trust Funds shows that there are enough funds to keep paying benefits through 2017 on just the interest from the fund.

However, after that, we have to start dipping into the actual trust fund to pay benefits. And with 78 million Boomers collecting (the first Boomer turned 62 in 2008), Social Security is out of money in 2041.

At that point, they'll only be able to pay 78 cents for each dollar of promised benefits. Those benefits will come from the contributions of then-current workers.

So if you're close to 65 should you be worried about your Social Security benefits? Probably not. Will Social Security alone be enough to live on in retirement? Probably not, but with your pension and savings, it should provide a nice supplement to your retirement income.

About the Author

Ann Vanderslice of the Wealth Design Group is a nationally recognized expert in retirement planning strategies for federal employees, working with federal clients since 2000. She is also an acclaimed trainer to many other financial professionals who serve federal employees.

Posted with permission from: MyFederalRetirement.com



Social Security And You- Myths And Truths
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