We hear a great deal of talk these days about the state of Social Security, Medicare, health insurance, and countless other areas which the government has influence over.  For some, this dialogue causes great unease and often times fear. 

Questions arise such as:

“How will I pay for health insurance if I retire?”

“Will I run out of money without Social Security?”

Let’s make Social Security our focus this month.  With the security blanket feeling less than secure, here are a few concepts that might set you more at ease regarding its current status.

Many retirees are upset that while they see rising health care prices and higher prices at the pump, their Social Security benefit has not gone up in 2 years.  Unfortunately, the cost of homes and automobiles has eliminated cost of living adjustments, while the actual expenses many retirees incur have gone up.  It is important to keep in mind that in 2009 we saw one of the largest cost-of-living increases in history, at 5.8%.  Since prices have gone down and up since then, current payouts are not far at all from where they should be.

For current retirees, the fear of the Social Security system running out of money is a bit unwarranted.  With reserves, there are at least enough funds for payouts to last until 2037.  That gets boomers turning 65 this year to age 91 before payouts would be in jeopardy.  With a benefit reduction of 25% in 2037, the amount paid in by wage earners each year would be able to subsidize retirees until at least 2084.  Most of us out there shouldn’t have to worry much beyond that.

Given politics in this country, it is likely that little will be done to remedy the issues facing Social Security anytime soon, so it is good to know that the current program should be able to continue paying out benefits for another 70+ years with minor modifications.

Thankfully, like many things, there are many strategies that can be used to remedy the issue when we do finally get around to it.  In our Prosperity Planning® process we ask clients to choose between early retirement, greater travel goals, higher estate goals etc…  With Social Security we can gradually raise the normal retirement age (since we are living longer, healthier lives), increase the early retirement age, or raise the annual income limit for workers paying into the system.  We adjust financial plans accordingly so clients can live the best life possible and there is no reason we cannot treat the Social Security system in such a way that it has the best life possible as well.

As with any financial decision, we always urge that you speak with your financial advisor.  Some bad decisions can be undone, while others can mean a lifetime of living with consequences.  Perhaps the best strategy for maximizing your benefit is to breathe easily and employ the right people to assist you in making the best financial decisions possible.

Have a most happy and prosperous 2011!