Living with the Social Security Trust Fund of the Future
Sep 23 '00
I decided many years ago, that to live a lifestyle I want when I retire will require that I have more income than the maximum allowed under Social Security. Towards that end, I have focused a lot of my finances on building wealth and providing a source from which I can draw income when I retire. Also, if I retire early, I will need to ensure I have a source of funds for those enjoyable days in my life also.
Social Security as it is in the news:
I seriously doubt that all of the doom and gloom associated with the talk in the media about Social Security will hold exactly true. It is unlikely that the fund will be allowed to run dry like some news agencies claim. Of course they cite various sources, but many of the sources write the news for media appeal. However, I am not sure that in 30 or 40 years that the retirees will have available the same benefit structure offered to them right now. This coupled with the rapidly fading corporate pension, and one can see that you need to do something other than rely on only Social Security.
The media talks about how there will be nothing available for kids of today. If it were a certainty that nothing would be available, most would balk at funding the current system. Why pay in if you know you will never get anything back. That is 7.5% of your income up to a ceiling level of +/-$80,000 per year. Thus if the media hype held 100% true, kids today would be better demanding that they control their 7.5% investment each year. With the employer matching portion that number doubles to 15%.
Another factor exploited by the media, which is a fact, is that there are fewer contributors to the fund per recipient than in the past. Thus, we all need to put in more to keep the current level of pay out for those on the take. Given current population growth trends, it would appear that there will be even fewer contributors in the future supporting significantly more on the take. This is not just the declining young workers but also accounts for the longer life expectancy for most folks today. Thus, the ranks of the elderly are swelling.
Thus, the media talks about shrinking money into the pot and the need for more money out for all of the above factors. I threw in a bit of logic about folks refusing to contribute if it were a certainty that they would never get a payout.
The Future of Social Security:
In order to accommodate some of what we know based on media coverage and common sense, will happen (less in and more out), we must look at alternatives for the system. The future of social security depends significantly upon how we change the current way of thinking and operations for the trust. In order for money to be left some things must change about the system. Some would say that the wealthy should not get any out of the system, while others believe the age for getting retirement benefits should be raised on a rolling average of life expectancy. Thus, some would be 70+ before they could retire with Social Security benefits.
There needs to be an appropriate economic balance of money in and money out of the system based on actuarial tables etc… to keep everything afloat. We know more will have to go in to keep the same levels or less out is the other option. I bet that as we age, we will see a slight reduction in benefits phased in over a long period of time, such as more than the possible remaining years in a presidential term. Additionally, it is possible we will each need to pony up more of our precious income. This will keep the fund afloat.
As a retiree what should I do?
If you are near retirement, I would certainly consider figuring out what kind of income you will need to live in a lifestyle that you desire. Then, take the estimate provided to you by Social Security and figure that that amount may decline slightly, when adjusted for inflation over the years you used for your life expectancy. (Yes, I know that unlike milk we don't all walk around with a printed expiration date.) This helps you figure where you stand related to relying on Social Security. If you are lucky, other wealth will generate income that allows you to rely less than 25% on Social Security. Besides if you want to work, you can still earn money and collect Social Security.
If you are planning to retire in 20+ years, then plan to have an income source that pretty much takes care of all of the expected expenses of living a lifestyle you desire. Then, consider the money from Social Security as extra spending money. Heck, if you decide you do not really need it, give it to a charity or to someone you know who does need the money. A co-worker is using his Social Security income to pay for his children's college while he lives off what he earns working for our company.
To sum it up, based on what I said above, do not rely too heavily on Social Security income if you can help it. It will most likely change over the next couple of decades, but will likely still be around. Try to keep the percent of income you will need from Social Security to less than 25%. Happy Investing (in a 401K) and Happy Retirement to you all!
 |
|
|
|
|
|
|
Epinions.com ID:
dbhoutx
|
 - Top 1000 |
|
Member: David
Location: Houston, Texas
Reviews written: 324
Trusted by: 225 members
About Me:
David loves outdoor activities, travel, breeding Registered Texas Longhorns.
|
|
|
© 1999-2009 Shopping.com, Inc.