With the nation’s debt swelling, the pressure on Washington to cut spending will only rise. Social Security may not be the first place lawmakers look. But the program, which has provided a significant financial cushion for retirees and others since the first checks were mailed in 1937, will surely be part of the discussion.
- New York Times
Even though the program has it's own stream of income, it is predicted that it will pay out more this year, then it brings in. The funds administrators expect Social Security to be able to pay full benefits through 2037. After-which baring in changes, the income generated will be enough to pay only about 75% of the benefits through 2083.
I mean imagine, full benefits can be paid by the fund for the next 27-years, then after that only 75% during the next 46-years.
So while Social Security’s finances are stable in the short term, most experts agree that the program needs to be bolstered for the long term. Among the proposals circulating is one from Representative John Boehner of Ohio, the House Republican leader, who recently suggested raising the retirement age to 70 for people at least 20 years from retirement.
Other options include increasing Social Security payroll taxes, subjecting more income to the tax, reducing initial benefit payments or cutting cost-of-living increases (which would affect current retirees).
But even if it’s not clear yet what, if anything, will be done to Social Security and when, we thought it would be useful to look at a worst-case possibility — to assume that benefits will not continue to be as generous. This is especially important as pensions continue to fade away.
- New York Times
So what should we do? Especially those of you still in your 20's and 30's, but all of us in general regardless of our ages. The simple answer is, put aside a lot more money to attempt to make up for any cut to benefits. Besides, wouldn't it be great, if we saved enough and didn't have to depend on social security in the first place?
And while lawmakers may, in the end, not decide to make drastic changes in Social Security, many of the financial advisers and other experts we talked to said they were erring on the side of caution and were already recommending that their clients start saving more now.
“People 50 and below should change their planning now to incorporate a benefit cut,” said Laurence J. Kotlikoff, an economics professor at Boston University who ran some numbers for us to see what life would be like if the retirement age were immediately raised to 70. That change would translate into a nearly 20 percent cut in benefits, because you would have to wait an extra three years to get the same amount of money, he added.
Several financial planners told us they were assuming that clients in their 30s and 40s might receive just 50 to 80 percent of their full benefits. Or, the advisers say, they may figure that the cost-of-living adjustments applied to benefits won’t keep pace with inflation, or some other combination of adjustments. (For the record, executives from AARP said their polls had long shown that younger people were skeptical about receiving full benefits.)
“It’s better to be conservative now than risk being underfunded for retirement,” said Jorie Johnson, a financial planner in New Jersey.
- New York Times
In the article, the New York Times looked at a couple that was 45-years old earning $140,000/year, with $255,000 in their 401k. If they find that social security were to be cut by 20%, they would need to save another $90,000.
Isn't amazing these articles always seem to focus on hypothetical persons making extraordinary incomes? I certainly don't make that much, nor do I think most of my readers (even though, I know a few do). So what about us in the real world? The New York Times, does not address us and what we need to do. Obviously, we would need to save more to, but how much? If some one making $140,000 at age 45 needs to save an additional $90,000, how much does a 42-year old making less then $30,000/year (currently), with only $10,000 in all the retirement accounts.
Whatever, the answer is as one of the financial advisers interviewed told the Times, don't rely on Social Security and think of any money coming their way as gravy. In-other-words, start saving today. Save early, the earlier the better. Teenagers and those in their 20's could easily retire rich, if they will set aside money now, when they are young, and allow that compounded interest work for them. For people, like myself that didn't plan when we were young, we will have a tougher time. It is possible, however for us to make something of our retirement accounts, it will just be harder. So, I will say, let's get stared today! Everyday we waste in saving is one less day of compounded interest and more dollars flying out the window.
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go ahead share your thoughts with me now, my ears are open. I'm always eager to hear what you think.
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