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Social Security Benefit

Posted by cameron

September 4, 2007 |

Did you read your social security benefit statement? I don’t know why I hadn’t noticed this before but there is an interesting little footnote to the benefits notice. I suspect that most people never get past the estimated benefits section. Right at the bottom of that section is a warning in bold letters. It reads, “Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2041, the payroll taxes collected will be enough to pay only about 75 percent of scheduled benefits.”

I hadn’t noticed that little gem before but it certainly puts a number to the problem that I can personalize. How can your retirement plan live up to a 25% pay cut? So if you retire early at 62 your benefit will be cut by 20% or 25% from full retirement age depending on when you were born. On top of that the government can only afford to pay 75% of your benefit later on so the net effect is a potential 45% - 50% cut if both conditions are true.

On the other hand, all those folks who insist on retiring early need only to work until full retirement age to compensate for the shortfall later on.

There is a lesson to be learned in the newspapers just this past week for those who blindly do what they want and retire early trusting Uncle Sam will bail them out. Bush announces a bail out plan for all those folks who screwed up with their mortgages. It seems that even the Republicans will bend to the voting power of large blocks. Take heart in that because the government is never going to allow widespread destitution even when you screw up. Write to your Congressman when it happens. Better yet, join AARP, strap on your oxygen tank, oil your walker and join the million-man stroll on Washington.


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