3 reasons not to rely on Social Security in retirement

Gary Alt |

Here's a retirement reality check.  The median family income in California is $63,145.  To have that income in retirement means the balance in your retirement plan has to be roughly $1.57 million today.  Not when you retire - today.

While we all thought Social Security would provide a portion of that amount, there are three reasons you can't rely on Social Security: 

1.  There's no real money in the Social Security trust fund, just IOU's.  Even back in the year 2000 the Office of Management and Budget published warnings about Social Security, military and government retirement plan trust funds:

"These balances are available to finance future benefit payments and other trust fund expenditures—but only in a bookkeeping sense. These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund benefits.

2.  The only way they can pay is to raise taxes or reduce benefits.  

"...they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund balances, therefore, does not, by itself, have any impact on the Government’s ability to pay benefits."

3.  The projected astronomical budget deficit doesn't even include money for Social Security.  Social Security is considered an "off the balance sheet" expenditure, which means it isn't included in the numbers when politicians speak of "the budget deficit."  If politicians can't control their spending and fix "the budget deficit," how can we expect them to fix Social Security?

There is only one reliable source of retirement income - your personal savings.  Start by saving 10%-20% of your annual income every year for your retirement.   Not for a new home, a new car or for traveling - for your retirement.