Social Security has been around for quite some time, since 1935 actually. It was created by Franklin D. Roosevelt to provide a social insurance program consisting of retirement, disability, and survivors' benefits. The funding comes from a special tax we see on our pay-stubs.

According to information in AICPA's 2016 "The CPA's Guide to Social Security Planning" written by Theodore J. Sarenski, CPA/PFS, the Trustees of the Social Security program issued a report on June 22, 2016 stating that about "60 million people received some type of Social Security benefit in 2015, totaling $897 billion."

This guide also points out a disheartening fact, without Social Security benefits about 44.4% of people over 65 would be living in poverty. As of 2012, only 9.1% of people over 65 were living in poverty. To put this is perspective, in 1960 35% of people over 65 were living in poverty.

To us, we think Social Security has done a great job of boosting the economy, and keeping many people out of poverty - but we have to ask, will it keep us out of poverty when we are 65?

So far, the Social Security Administration admits their combined trust funds will be exhausted in 2034, about 17 years from now. In 2034 they will only be able to pay 79% of benefits from tax revenues.

How do we account for the ultimate reduction in Social Security benefits?

In our retirement projections, we offer the client a choice. Show their estimated Social Security benefits, or not.

Should a client choose to include their estimated Social Security benefits, we have rules built into our planning software, as suggested by AICPA's 2016 "The CPA's Guide to Social Security Planning."

The first rule states that for clients born before 1967, we will include 100% of the calculated benefit in retirement projections. For client's born after 1967 but before 1990, we include 75% of the calculated benefit. After 1990, we only include 50% to provide a safety net in case of future reductions.

In order to provide the best advice, we show clients both models - with and without Social Security benefits - so that they can understand what their financial situation might look like in retirement.

Disclosures:We are not CPA's. We do not charge a fee to view this research on Social Security benefits. This content is provided as free educational material. Not everyone will be eligible for Social Security benefits. We cannot predict the future state of the Social Security Administration, nor do we intend to with this article.