Can you count on Social Security?

The Social Security Administration recently turned 75 years old, and in its seven and a half decades, it has survived economic ups and downs and remained strong — until now. For the first time in its long history, Social Security is running at a deficit and as of 2016, this deficit will be permanent until 2037, when it’s projected that all funds will be completely exhausted.

Because of this, it’s no longer wise to count on Social Security as a guaranteed source of income in retirement, especially if you still have a ways to go. As a financial advisor, I feel strongly about the need to pay yourself first for retirement. Social Security was never intended to be a person’s sole source of income in retirement. You must take responsibility for your quality of life in the golden years, and with the looming possibility that the government may only be providing limited assistance, if any, it’s important to plan ahead. The amount of time you have to retirement should play a key role in how you save.

If you are more than 27 years from retiring, it is projected that all Social Security funds will be exhausted, meaning you will be receiving limited benefits or maybe even nothing at all. On the upside, with as much time as you have until retirement, you have ample time to start and/or continue saving. One of the quickest and most effective ways to save is through an employer-sponsored plan, such as a 401(k) (especially if you receive an employer match on your 401(k) contributions) or through a traditional or Roth IRA. But don’t make the mistake in thinking that you have “plenty of time” — the golden years have a tendency to sneak up on you, so start and commit to saving today!

If you are between five and 27 years away from retirement, the best idea for you is to maximize your savings. Participating in catch-up contributions on your retirement accounts if you’re 50 or older or using accounts with compounding interest are good ways to maximize assets for retirement. Be sure your investments match your risk tolerance as well. The closer you get to retirement the return “of” your money becomes more important than a return “on” your money.

If you’re retired or within five years of retirement, you’re in luck. The likelihood of any significant changes to your Social Security benefits appears to be low. But, as a form of precaution, be sure your savings are safe and protected from any volatile investments, and set up to provide you an income well into the golden years. How you withdraw your money does matter.

—Scott Cramer

Founder and president of Cramer & Rauchegger, an independent retirement and financial advisory firm based in Winter Park, Florida