Social Security Snapshot: What will I get?
What Will You Collect In Social Security?
Social Security. Those two words hold promise and hope for some people, while others just endure the mockery of limited funds that Social Security provides. What is Social Security and how did it get started? Even more importantly, how much will you be collecting in Social Security when you retire?
You have been paying in for years now, but you keep hearing a little voice in the back of your head saying, “no matter how much I put in, there will not be any left by the time I retire.” Is this true? Will the Social Security funds dry up before you have a chance to tap into at least the amount you put in over all these years? Let’s take a quick look at Social Security.
What Is Social Security?
Social Security was established and signed into law in 1935 by President Franklin D. Roosevelt. The first lump sum payment was made, shortly after, in 1937 and on-going monthly payments first began in 1940. Social Security was originally meant to be a retirement account during the Great Depression.
All of the businesses that failed during the Great Depression, had no funds to pay out the retirement accounts for their workers, so the government stepped in to help. The idea at the time was to have the people currently working help out and pay the retirement for those who were no longer able to provide for themselves.
This was great until the baby boomer generation came. This extremely large generation put a lot of money in to help out the older generations, but now there are far fewer people working than are retiring.
How Social Security Works
As you pay into Social Security, those funds immediately get paid out to the people currently eligible for Social Security. The reason this has been so hard to swallow for some people is due to the introduction of the 401(k) and personal retirement accounts. With the 401(k), the same amount of money put in will earn more interest than Social Security and the personal retirement account has your name on it, whereas there is no traditional account with Social Security.
How Much Will You Get Back?
This question is rather difficult to answer because the Social Security system currently purchases U.S. Treasury Bonds from the government, which will have to be paid out by the government at a later date. So far, the best way to figure out how much you will get back is to look at your annual statement. There are also calculators that give a rough approximation based on your age and current income, but they are not exact.
Since Social Security is a highly impersonal form of retirement. For that reason, it is always best to work with a financial planner to set up and maintain a retirement account of your own. Using additional methods of retirement planning, such as personal retirement accounts, is always a good idea.