On August 14, 1935, president Franklin D. Roosevelt signed into law what was considered my many to be the great moral successes of the 20th century. It provided a means of income for disabled or retired individuals, sort of a safety net that included unemployment insurance after the Great Depression. For over 60 years, millions of Americans have relied on their monthly Social Security check to keep them above the poverty line.
The initial payroll tax deduction for Social Security hit American paychecks in 1937.In 1950, there were 16 workers contributing to every one social security benefactor, with 2% of their pay deducted automatically. Today, just over 3 workers are supporting each Social Security beneficiary, with the number of workers to drop to 2 in 2008 when the very first wave of baby-boomers is set to retire.
The funds of Social Security are running out.
There are so many different ideas on the table for reforming Social Security. Some want it to become a privatized company while others want to increase its tax or have a certain percentage invested into a personal retirement account. Still others don’t care how it’s fixed, just that it’s fixed. One thing is for certain, the current “Pay-as-you-go” system is running out of “payers in” and getting more “payers out”. Under this current system, a 30-year old worker of today will receive 27% less in Social Security benefits when they retire.
The Feds Want you to Save
If you haven’t contributed to an available employer-matching 401K, start now, as every little bit can help. If your employer doesn’t offer such a benefit, start one at a private financial institution or find a non-commission paid financial advisor to steer you in the right direction. The feds are allowing us to invest up to $4,000 in 2006 into tax-deferred IRA ($5,000 is you’re over 50-to catch up). The 401K limit has increased to $15,000.
The Kind-of Good News
If you were born before 1950, lucky for you, Social Security benefits will not be changed in any way, shape or form- that’s according to the Bush Administration, so you can take this information as you will. But the problems are still in the future for those of us born in 1951 or after, and no one knows what lies ahead for Social security reform.
So Now What
Facts are still facts, and there’s not much that we can do about them. I was always taught growing up that if you can’t afford to buy a new car, don’t buy one. If you can’t afford to take a vacation, you stay home. So I guess that if you can’t afford to retire, you should keep working.
But then there are more facts.
Studies show that semi-retirees, those that still work part-time are living a happier, fuller semi-retired lifestyle than those who don’t have something to do every day. Maybe it’s the exercise, feeling like a productive member of society, the lesser worry about money, or a little bit of all of the above. Whatever it is, until Social Security reform is 100% in the bag, we all need to think about retirement being our own responsibility.
