Although no one should depend solely on Social Security for retirement, many people are taking a second look at it in light of our economic slump. You need to not only refresh your understanding of Social Security, but also think about how it may (or may not) fit into your overall strategy.

Uncertain times

Why is the future of Social Security so uncertain? Unlike your contributions to a 401(k) or IRA, the money taken from your paycheck via payroll taxes (12.4 percent, split evenly between employer and employee up to each year's limit) doesn't go directly into a Social Security account with your name on it.

Rather, Social Security funds are sent straight into the federal Treasury, where they're used to pay for the government's current financial obligations -- including the retirement benefits awaiting today's retirees.

This approach can work well, provided enough people are paying into the system compared to the number of people collecting benefits. In previous decades, there were usually many workers supporting every recipient.But that ratio has been dropping in recent years. And no recovery is in sight, as more and more baby boomers hit retirement age and start to collect benefits while life expectancies continue to increase.

No one knows

Although no one knows for sure, Social Security probably won't go away entirely. Legislators will likely implement a combination of higher payroll taxes and reduced benefits. The current full retirement age is between 65 and 67, depending on the individual's year of birth. Another widely discussed possibility is a more fundamental re-envisioning of the program -- perhaps to include private investment accounts for younger workers.

Whatever the case may be, your retirement plan shouldn't depend on Social Security, but it should factor your projected benefits in. If your expected retirement date is soon, you can probably count on Social Security being there for you in its existing form. If you're relatively young, however, it's more likely that the program could undergo significant changes before you reach retirement age.

Conservative vs. aggressive

As is often the case with retirement planning, risk tolerance plays a huge role. You need to determine how large a Social Security presence you're comfortable factoring into your retirement strategy. Then you'll need to accumulate enough assets to provide yourself a comfortable retirement income when combined with the monthly government checks you expect.

Indeed, age is also a big factor when determining your strategy for building up and preserving your retirement savings. Younger investors can generally afford to own the vast majority of their retirement nest egg in higher-volatility assets, such as stocks, given their longer time horizon and ability to wait out market downturns.

This general discussion is not intended as advice to anyone. Retirement planning is complex and highly personal. You should discuss your particular situation with a qualified professional.

Norm Grill is the managing partner of Grill & Partners LLC, certified public accountants and consultants to closely held companies and high-net-worth individuals, with offices in Fairfield and Greenwich. He can be reached at 203-254-3880 or