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By Christine Benz | 05-03-2010 04:43 PM

Can You Depend on Social Security?

Younger, higher-income workers shouldn't plan on the same level of benefits that their parents and grandparents receive, says the Heritage Foundation's David John.

Christine Benz: Hi. I'm Christine Benz for Morningstar. I'm here at the Investment News Retirement Income Summit, and I'm joined by David John. David is a senior research fellow for the Heritage Foundation. David, thank you for being here.

David John: Thanks for having me.

Benz: So, David, you've done a lot of work on Social Security, looking at the viability of Social Security. And what we hear from investors and financial advisers is that they struggle with figuring out how to factor in Social Security into their retirement planning puzzle.

And I'm wondering if you can offer some pointers based on the research you've done, how should people think about planning for Social Security as part of their total retirement package?

John: Well, first off, Social Security will be there. But the question that's going to be important for younger workers is what the benefit level is actually going to be. Social Security's long-term funding can pay about three-fourths of the benefits that it has promised for younger workers. And these are workers who are probably in their 30s or their 20s or something along that line.

The other thing that's going to come about, though, is that increasingly there's going to be an effort to focus Social Security's scarce resources on the people who need it the most. So, Social Security will be there, but if you're a younger worker you shouldn't plan that you're going to get precisely the same level of benefits that your parents got.

Likewise, the younger you are and the higher your income, the more likely that Social Security benefits are going to be lower than they would be now--because that money is going to be focused down to people who desperately need it who have no other savings or anything along that line. So, plan on Social Security, but don't necessarily plan on receiving the same amount as you would now.

Social Security has to be fixed. And the longer we wait for that, the more painful it's going to be.

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