Imagine Your Retirement Without Social Security -- Would You Survive?

Science fiction is often referred to as a genre that specializes in tackling "what if" questions. For example, what if we could time-travel? What if robots had minds of their own? What if aliens came to Earth to rule us? What if our society devolves into a dystopia?

Whether you enjoy that genre or not, it's a good idea to engage in a little what-if thinking -- about your finances, for example. One worthwhile question to ponder is this: What if Social Security went away?

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Social Security 101

Social Security works by taxing workers' earnings and then using that money to pay out benefits to retirees. You can claim your Social Security benefits as early as age 62, but your checks will be smaller (though you'll receive more of them) -- and if you delay up to age 70, your checks will be bigger (though you'll receive fewer, in total). It's vital to think through the issue of when to claim Social Security carefully, as it can make a big difference in your total benefits received.

(For most people, waiting until age 70 seems to be the best move.)

How much do retirees get from Social Security? Well, the most recent average monthly benefit for retired workers was $2,000 as of April -- or $24,000 for the year. That probably doesn't seem like much, right? Well, know these things:

• If you've received above-average earnings, you'll collect above-average Social Security benefits -- though the maximum monthly benefit was recently $5,108, a very hard-to-attain sum.
• Benefits are increased in most years via cost-of-living adjustments (COLAs).
• If you set up a my Social Security account with the Social Security Administration (SS)A, you'll be able to see estimates of your future benefits based on your earnings history.
• There are multiple ways to increase your benefits if you haven't claimed them yet, such as increasing your income as much as you can and delaying starting to collect your benefits.

What if Social Security went away?

What if Social Security went away? That's a horrifying thought -- without Social Security, more than 22 million people would fall below the poverty line, per the Center for Budget and Policy Priorities.

How would you fare? Well, you should have noticed that the average Social Security benefit of $24,000 per year is not a lot of money. Let's say that you receive 50% more than that, or $36,000 for the year -- $3,000 per month. Will that be enough for you? Probably not. (Social Security was actually designed to provide only about 40% of your pre-retirement income.)

It's a good idea for most or all of us to have a retirement plan -- and to set up multiple income streams for our retirement. First, crunch some numbers to come up with an estimate of how much you'll need in retirement -- then figure out how you'll amass that sum. Here's an example of some possible income streams and how they might, together, supply what you need:

• Dividend-paying stocks
• Interest-bearing accounts
• Retirement accounts
• Pensions
• Annuities
• Rents from real estate properties

Since we're imagining a retirement without Social Security, see how much income you might set up for your retired self without it. Will it be enough? You might need to beef up your savings and investing for retirement in order to build somewhat bigger non-Social-Security income streams.

Will Social Security go away?

You might be wondering by now just how realistic it is to imagine having no Social Security. So, consider this: While the Social Security system has worked well for many decades, it's facing some challenges in the coming years, as many people live longer and retire earlier than they used to. If nothing is done to strengthen Social Security (and there are multiple ways to do so), within a decade, beneficiaries will be collecting only 83% of their due. That's far from 0%, but it's still a sizable cut.

The news gets worse, though. President Trump and his administration have been busy changing many aspects of Social Security over the past few months. For instance, he's ending paper Social Security checks, requiring electronic fund transfers. That will save our government some money, but close to 500,000 Americans receive paper checks, so the change will be disruptive for them.

The administration is also proposing bigger changes, such as eliminating taxes on benefits. That change might sound good, but it will reduce the dollars flowing into the program, leaving it weaker. My colleague, Adam Levy, has asserted that "Donald Trump and Congress are failing to protect Social Security."

Basically, no one knows what shape Social Security will be in next year or in five or 10 years. So, it's really a good idea to prepare for the worst, just in case, by setting up a secure retirement for yourself that doesn't rely too heavily on Social Security.

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