"Is Social Security still going to be around when I retire?"
That’s a question that concerned American workers are asking at a time when employers are increasingly opting not to provide traditional pension plans or freezing existing ones. Meanwhile, 401(k) plans have been ravaged by a prolonged stock-market free fall, and some employers have ceased matching contributions for them.
The concern about retirement security escalated another notch on May 12, when Social Security trustees projected that payroll tax revenues flowing into the program will fall below program costs by 2016 – a scant seven years away and a year earlier than forecast last year.
By 2037 – four years earlier than previously forecast – Social Security’s trust funds are projected to be exhausted, leaving the program with only enough revenues to pay about 75 percent of benefits.
The forecasts have become more pessimistic as a result of the deep recession, which has resulted in a net loss of 5.7 million jobs since December 2007 and an unemployment rate of 8.9 percent in April, the highest in 25 years. That means less payroll tax revenue going into Social Security.
Social Security’s long-term fate is significant in terms of retirement security because it is the biggest single source of income for older Americans.
Social Security benefit checks provide 38.6 percent of the total income of Americans 65 and over, according to the Employee Benefit Research Institute. Other sources are earnings, 25.3 percent; pensions and annuities, 18.6 percent, income from assets, 15.6 percent; and other, 1.8 percent.
About 94 percent of current American workers pay into Social Security, but less than half are active participants in a 401(k) plan and less than a third have a traditional defined-benefit pension plan.
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