According to the Social Security Administration, their trust fund entered a state of permanent annual deficits back in 2010. These deficits are expected to increase each year, similar to every Ponzi scheme that is doomed to fail. On current social security statements that are mailed to taxpayers, it is written that, “Without changes by 2037, the Social Security Trust Fund will be exhausted and there will be enough money to pay only about 76 cents for every dollar of scheduled benefits.”
This cut is a drop of 24% from what social security has scheduled to pay you. Remember, this is a government entity with a history of financial projections that are overly optimistic and revised downward every year. So the 24% pay cut will very likely be more severe and start sooner than their current prediction.
We are all faced with the increasing probability of declining social security payments, postponed retirement start dates, or additional new regulations like means-testing (reducing your social security payment based upon your other income or net worth). This highlights how important it is for you to be responsible for your own financial future by saving on your own for retirement. Successful retirement and early retirement are based upon up-front financial planning and a high rate of savings. For example, a minimum amount of money that you should be saving for retirement is 15% for your income over your entire career. This 15% is based upon studies of successful retirees and can either be pre-tax money with your employer or post-tax money into a Roth IRA that you setup on your own. Mapping out your financial life will determine if this 15% retirement savings rate is too high or too low for your specific circumstances.
Money that you set aside on your own is money that you control, unlike social security or pensions that are controlled by politicians. Money that you control can:
- Earn more by investing more appropriately
- Be placed and invested where its tax liability is lower
- Will not be reduced by the management failures of politicians
The important element is to consistently save at least 15% of your pay, make it a routine, and invest the money prudently rather than speculatively.