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Are you ready to retire without Social Security incomeBY: Jessica | Category: Self Improvement | Post Date: 2009-06-19
Social security is a system in United States where all workers and corporations contribute a small portion of their income to a government run agency called "Social Security Administration". All the money collected by this agency is used to provide some supplemental income ( sort of retirement income) to retirees over the age of 65.
Why was Social Security income it a great idea:
This system is works great when contributions are more than the payouts, i.e. percentage of retired people is much lower than those still working. If you think, this scheme is no more than a government run Ponzi scheme.
Why is Social Security running out of money and may probably end:
According to the United States Census Bureau, Baby boomer generation are people born between 1946 and 1964. During these years an unusually high number of kids were being born and now they are starting to retire. This mass crowd of people will basically largely increase the percentage of who are at the receiving end, while the people who are contributing in the system has not increased that significantly. This means we have to be ready to retire without Social Security income, even if it does not go away completely.
It is estimated that by year 2016, the income / benefits being paid out will start to exceed the amount being contributed and by year 2037 beneficiaries will be able to receive only about three quarters of the scheduled benefits, unless changes are made. Similarly, another system called Medicare is facing a similar fate, may be starting 2017.
These dates may further slip towards us much earlier than anticipated because of several factors like 'Recession' which has caused lesser collection of money due to higher unemployment.
Advice your younger US workers:
Social Security may never go away but you may face additional restrictions like - higher retirement age and lesser benefits than being promised now. Is this unfair - Absolutely ... but there may not be any other option left with the government than to reduce your Social Security income.
* Save as much as possible so you can retire peacefully.
* Participate in your employer sponsored benefits, like 401K retirement plan.
* Contribute towards Roth IRA retirement plan.
* Keep your money diversified. For example keep money in Stocks/Mutual funds, Cash, Bonds, Gold, Real Estate, International equities etc ...
* Spend less and cut down unnecessary expenses.
It's not that the sky is falling but if you start preparing in your 20's and 30's then you will be in a better position to face these issues than deciding to deal with them later. People who plan to retire only on Social Security will be in a big trouble. If you have friends who have not yet started thinking on how they will retire, don't follow their example, instead advice them to start saving too.
We are truly in a big trouble in coming decades, and it is difficult to imagine how things will shape up. Plan today for a better tomorrow.
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