Social Security Isn't Going Away. Should You Pretend That It Is?

Social Security has been in the news a lot in the past year.

In October, there was a lot of buzz around the program's upcoming cost-of-living adjustment (COLA). Then, once that COLA was announced, there was speculation as to whether Medicare cost increases would eat into that raise substantially (spoiler alert: they will).

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But earlier in the year, the Social Security Trustees released their latest report on the state of the program's finances. And the news wasn't exactly wonderful.

At this point, you may be wondering whether Social Security is on the verge of bankruptcy. And you've probably heard things along those lines, albeit from unreliable sources.

The fact of the matter is that Social Security can't go bankrupt because it has an ongoing revenue stream -- payroll taxes. As people work, the program gets funded. So there's no need to worry that Social Security is going away.

But you may want to tell yourself that Social Security is not going to pay you retirement benefits -- even though that isn't the case.

What's really happening with Social Security's finances

Social Security is facing a financial shortfall in the coming years. As baby boomers exit the workforce and start claiming benefits, Social Security won't have enough revenue to keep up with its payment obligations.

The program's Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement benefits, will be able to meet its financial obligations until 2033. Beyond that point, benefits could face a 23% reduction.

If lawmakers allow Social Security to combine its OASI Trust Fund with its Disability Insurance fund, benefits will be payable in full until 2034. Beyond that point, benefits could face a 19% reduction.

These projections could wiggle in the coming years as the Social Security Trustees continue to assess the program's projected revenue. The takeaway, however, is that Social Security is not at risk of going away completely. But convincing yourself it is may not be such a bad thing.

Why you may want to pretend that Social Security is disappearing

The reason you may want to tell yourself Social Security won't pay you benefits in retirement is simple. If you won't be getting income from Social Security, you'll perhaps be more inspired to work on building your own retirement nest egg.

Part of the reason some people may skimp on retirement savings is that they figure they can fall back on Social Security for income. Of course, this isn't the only reason people end up lacking savings. Sometimes, life gets in the way. But if you tell yourself you can't rely on Social Security for retirement income, it may be the push you need to boost contributions to your IRA or 401(k).

If that doesn't convince you, here's something else you should know. Even without benefit cuts, Social Security will only replace about 40% of your pre-retirement wages. Most retirees need about twice that much money to maintain a comfortable lifestyle.

So even if nothing bad happens to Social Security at all, and the program is able to pay 100% of benefits, it still makes sense to do your best to build retirement savings. Here are some ways to get a boost:

• Snag your full workplace match each year in your 401(k) plan
• Bank your raise every January (or whenever it arrives)
• Get into the habit of budgeting and prioritize your IRA or 401(k)

You don't have to worry that Social Security is going away. You don't even have to pretend that it is. Just be mindful of how much money those benefits will pay you, and do your best to save well so they're not your only retirement income source.

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