For years now, taxpayers, economists and lawmakers have been wondering whether Social Security will be around for the long haul. While no one should expect Social Security to be the cornerstone of their retirement income, it’s important to consider how it should fit into your overall retirement plan.

On shaky ground

Why is the future of Social Security uncertain? Well, unlike your contributions to a 401(k) plan or IRA, the money taken from your paycheck via payroll taxes (for 2012, 4.2% of your wage earnings; 10.4% if you’re self-employed) 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. In turn, tomorrow’s benefits will be paid in part by payroll taxes on the next generation of workers, whose benefits will be paid in part by the subsequent generation. And so on.

This approach can work well, provided that enough people are paying into the system compared to the number of people collecting benefits. In previous decades, there were usually many workers supporting each recipient of benefits.

But that ratio has been dropping precipitously in recent years. And no recovery is in sight as more and more baby boomers hit retirement age and start to collect benefits and life expectancies continue to increase. Unless action is taken, the current annual surpluses could conceivably turn into deficits in this decade or the next, thus putting the system on shaky ground.

What the future holds

Social Security  probably  won’t go away entirely. Legislators will likely implement a combination of higher payroll taxes and reduced benefits. For example, benefits might be reduced by raising the “full” retirement age to reflect today’s longer life expectancies. (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 in your projected benefits. 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.

Building and preserving your next egg

Whether retirement is decades away or right around the corner, you must determine how large a Social Security presence you’re comfortable factoring into your retirement strategy. Then you need to accumulate enough assets to provide yourself a comfortable retirement income when combined with the monthly government checks you expect.

Age is also a big factor when determining your strategy for building up and preserving your retirement savings — whether in tax-advantaged retirement accounts, such as IRAs and 401(k) plans, or in taxable savings and brokerage accounts. 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.

But even investors in or approaching retirement should consider holding some stocks to keep pace with the rising cost of living over time. And no matter what your age, you’ll benefit from owning a diversified portfolio of various asset types. Each can be expected to move up and down at different times and help protect you against market fluctuations. Your financial advisor can help you determine the appropriate asset mix for your individual situation.

Take time to address the issue

The Social Security program is still alive and kicking, but it’s critical that you also understand its limitations. So make sure you do all you can to pump up your personal retirement savings. •