Like millions of Americans, if you think that Social Security is your retirement plan, you may want to take a second look!
The thought of saving for retirement can seem like a pipe dream for those in their 30’s and 40’s, because RETIREMENT is a long road into the future. AND then with COVID making life more difficult, just getting through 2020 is a big challenge. As a result of the fear and economic woes, how can people deal with financial uncertainty? Because folks still have to pay monthly bills, and have an emergency fund! As a consequence of these external forces, does your family have any cash left to put toward retirement? Figure out where you are with your finances today. As a result, you can make a plan for the future.
Do I have to Budget?
A budget is just planning for the future; it is not punishment, torture, or guilt-inducing! For example, having a financial roadmap, makes it easier to accomplish goals. Having extra income calms people’s fears about having enough money. Additionally, setting aside extra money each month helps people to invest in the future. For example, if you decide to go on a road trip, you set your destination into a GPS app and choose the easiest or quickest route. This same mindset can also be applied to your money. By knowing where you are and setting a financial goal for the next year, you can take action steps now. These action steps set the foundation for your five, ten or twenty year goals. In fact, setting intentions help you achieve your “big hairy goals.” Consequently, you are also more prepared for “bumps” in the road.
If Social Security is your retirement plan, will you have enough money? Most people consider budgeting from an expense point of view, but few take the time to analyze everything that provides more income. In order to be more confident with money, it is vital to become aware of money coming in and going out. Although cutting down expenses is essential, many people find that adding revenue is just as important. So, asking for a raise, looking for better job, or adding a side-gig can create higher income. Be mindful of your time, and create pockets of space for what’s most important to you and your family. Learn more about your approach to money. Take the Money Nerve Quiz
Money Coming In: Social Security and More
Paycheck (or unemployment or disability)
Rent money from roommate
Gift s (birthday money, e.g.)
Loan repayments from family or friends
Any surprises on your income list? Just what you expected?
Money Going Out: Your Retirement Plan
Rent or mortgage
Drinks or alcohol
Recreation or fitness
Manicure or hair styling or massage
Pet food or supplies
Insurance: car or health or life or house
Interest: loans or credit cards
Weekly lottery tickets
Accurate Picture of Your Retirement Finances
Actually, budgets look different for each person. You must be honest with yourself, and last, be sure you included everything! Did you find you have extra money each month, or are you running in a deficit? Above all, decide how to balance out the numbers while continuing to paying down any credit debt, and depositing a small amount of money in savings. By the way, consistent saving deposits will add up exponentially over time before you know it. Then you can make a concerted effort to save for retirement. You may find that depending only on social security as your retirement plan may have an adverse effect on your golden years.
The 2020 Social Security Report
“In 2019, Social Security’s reserves were $2.9 trillion at the year’s end, having increased by $2 billion. The Trustees project that under the intermediate assumptions, the Old-Age and Survivors Insurance (OASI) Trust Fund will pay full benefits on a timely basis until 2034, unchanged from last year. At this time, the Disability Insurance (DI) Trust Fund is projected to pay full benefits until 2065, 13 years later than indicated in last year’s Social Security report.
Disabled-worker applications have declined substantially since 2010, and the number of disabled-worker beneficiaries in current payment status has been falling since 2014. Accordingly, the Trustees have again reduced the long-range disability incidence rate assumption in this report.
The projected reserve depletion date for the combined OASI and DI funds is 2035, the same as in last year’s report.1 Over the 75-year projection period, Social Security faces an actuarial deficit of 3.21 percent of taxable payroll, increased from the 2.78 percent figure projected last year.
The main causes are:
(1) the repeal of the excise tax on employer-sponsored group health insurance premiums above a specified level (commonly referred to as the “Cadillac tax”), which slows the projected growth in real covered earnings and results in less payroll tax income, and
(2) changes in assumptions, including lower anticipated fertility rates, consumer inflation, and interest rates. The actuarial deficit equals 1.1 percent of gross domestic product (GDP) through 2094.”
If you want to confirm how much you can expect in retirement from Social Security, visit the SSA’s estimator page.
As a result, you should take an honest look at your priorities and budget. In that case, you can successfully navigate safe passage to retirement and enjoy Social Security as a buffer in your golden years. You’ll be glad you did!