Are you depending on Social Security benefits?

Social Security benefits are not as reliable as people believe. We need to start planning and saving more for our own retirement now, whether we are in our 20's, 40's, or 60's.

Eileen Ambrose has an excellent column in today's Baltimore Sun regarding financial planning for retirement. She highlights the fact that many boomers are starting to take their social security benefits before age 66, and this has a large financial impact.

For people born between 1943 and 1957, the Normal Retirement Age is now 66 years old. That means that benefits are reduced, for your entire lifetime, if you start taking benefits early. On the other hand, if you can wait just one more year to start SSA payments, the government will pay you an extra 8% of benefits.

A basic way older boomers may improve their finances is by delaying
retirement. Each year past age 66 that a worker defers collecting Social
Security, annual benefits go up another 8 percent, until age 70.

The Social Security Administration has a very easy to use calculator, to determine your normal retirement age, and how much in benefits you might lose or gain by changing the age when you first take benefits.

However, the calculations of future Social Security benefits will likely change for many people, since the government can't afford to keep paying these benefits. The unfunded liability for Social Security benefits, promised to be paid over the next 75 years, is $6.5 trillion.

As Paul Ryan noted, according to the 2011 annual report of the the trustees of Social Security:

The Trustees now project that Social Security has entered into a period of permanent cash deficits. That means that to pay full Social Security benefits, the government must cut spending, raise taxes, or, more realistically, borrow more money to finance pension payments.
The 75-year actuarial imbalance has increased to 2.22 percent of payroll (up from 1.92 percent last year).
Social Security faces a $6.5 trillion unfunded liability (up from $5.4 trillion last year.)
The Social Security Trust Funds are expected to go insolvent in 2036,
meaning that certain birth cohorts above the age of 55 can expect to see a 23 percent cut in their benefits.

Do we want to burden our children with sharply increased taxes and government debt to pay for social security benefits for their parents and grandparents? We need to start to solve this problem now.