And it should. Not only is Social Security celebrating its 80th birthday, but it’s playing an ever more important role in ensuring Americans’ retirement security.
Social Security was signed into law on August 14, 1935 by President Franklin Roosevelt. According to AARP, Social Security now provides at least half the family income for about 1 in 2 older Americans, and it provides most income for 1 in 4.
Social Security income has become even more critical over the years as traditional pensions have disappeared, and the burden of saving for retirement has shifted to workers.
Worried whether Social Security will still be there for you?
“Despite the program’s challenges, most experts agree that Social Security will endure as the foundation of retirement security for the vast majority of Americans,” says AARP.
By the way, if you think Social Security income isn’t a big deal, even for the well-off, consider this. The maximum Social Security benefit this year is $2,663 per month or $31,956 per year. That’s what might be earned by a professional or business executive retiring at full retirement age.
Do you know how much money you would need in your portfolio to generate that same income of $31,956 per year, given today’s low interest rates and a 4% sustainable withdrawal rate?
Believe it or not, you would need a portfolio of $798,900 to generate that same annual income, and an even larger retirement nest egg of $1,198,350 to match what a couple might receive from Social Security (one retiree benefit + one spousal benefit).
And here’s the icing on the cupcake. Social Security comes with a full government guarantee and an annual Cost of Living increase.
So while it’s easy to pooh-pooh Social Security and minimize its importance for the more affluent, that would be a big mistake. Even for the well-off, Social Security provides a very substantial benefit that provides retirees with additional security, withdrawal flexibility and the means to make their portfolios last much longer.