People have traditionally seen Social Security benefits as the foundation of their retirement planning programs. The Social Security contributions deducted from workers’ paychecks have, in effect, served as a government-enforced retirement savings plan.

However, the Social Security system is under increasing strain. Better health care and longer life spans have resulted in an increasing number of people drawing Social Security benefits. As the baby boom generation (those born between 1946 and 1964) has begun to retire, even greater demands are being placed on the system.

In 1950, there were 16.5 active workers to support each person receiving Social Security benefits. In 2023, there were only 2.7 workers supporting each Social Security beneficiary. And it is projected that there will be only 2.3 active workers to support each Social Security beneficiary by 2040.¹

Although Social Security payments are typically adjusted for inflation, your own income and expenses may rise at a faster pace. And you might have to wait longer than you anticipated to qualify for full benefits.

It used to be that full benefits were available after you reached age 65. But since 2003, the age to qualify for full benefits has been increasing on a graduated scale based on year of birth. By 2027, the age to qualify for full Social Security benefits will have increased to age 67, where it is currently scheduled to remain.

That means you may have to wait longer to qualify for full Social Security benefits to start replacing a smaller percentage of your pre-retirement income.

When calculating the income you will have in retirement, you might recognize that Social Security benefits may play a more limited role. Some financial professionals suggest ignoring Social Security altogether when developing a retirement income plan.

Source: 1) Social Security Administration, 2023

Note: You can view your statement online by visiting www.ssa.gov/myaccount and creating your own personal Social Security account on the Social Security website. 

When selecting ways to invest your cash reserve, you should balance your liquidity needs with potential returns. Short-term investment instruments, such as Treasury bills, certificates of deposit, and money market mutual funds, can provide you with the liquidity needed to meet expected and unexpected expenses and to increase your short-term investment income.

By actively managing your short-term reserves, you can provide a means of saving for the future. You can use this money to increase your net worth with little or no additional risk to your principal. It’s important to remember that because income and personal circumstances are subject to change, you should conduct a periodic review of your cash reserve and its structure.

Note: Treasury bills are backed by the full faith and credit of the U.S. government as to the timely payment of principal and interest.

Note: Bank CDs are insured by the FDIC for up to $250,000 per depositor, per federally insured institution.

Money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in a money market fund.

Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.