Social Security benefits have been a hot topic for years now, and it does not seem like many politicians are taking action. Young professionals growing up these days certainly cannot rely on social security to be a substantial retirement vehicle in our futures. So, the question is: what can we do to change this?
One critical action people need to take is to create a retirement plan and begin saving while they are young. By doing this, you compliment what you receive from your employee benefits (if any) while also trying to save 15 percent of your yearly earnings. If most of the young adults in America started to do this at a young age, the end result would be that less people would need to depend those social security benefits. Compound interest earned in retirement plans over time can exponentially increase the potential of a successful, comfortable retirement—at which point any Social Security benefits could be considered a nice bonus!
Another thing we can do to help rectify the retirement savings problem is to educate the younger class of Americans who do not even consider long-term financial planning. Midland IRA performed a small survey of random individuals from the ages of 19-27 and asked them if they knew anything about basic retirement planning and what they are doing to save for the long term. Surprisingly, the answer we received from about 90% of them was, “Nothing.” Not only is this scary, it also represents a huge problem in our opinion because most of these people are not poor individuals. They should have the proper resources and support to have been taught the basics of running their own financial lives. If our poll represents even half of the number of young adults in their age group in America today—if they do not start thinking about their futures and what their financial needs are, then the savings problem across the board could be far greater than lack of Social Security benefits.
On that note, there was a proposal by President Bush to start privatizing Social Security so that everyone in the country is not depending on a currently failing system. His proposal was to give people an account option that allowed workers to voluntarily put two percent of their taxable wages into a personal account, which would not affect their social security earnings. Recently President Obama’s commission on Social Security had another reform that would help create that personal account by adding 2.5 percent of the matching payroll tax up to $1,000, which would help people get in that mind set of looking more long term and have them see how important it is to begin saving early in life.
This again is just pushing back the gap but if we are able to get more people to begin planning and saving early in life, these actions over time can dramatically affect one’s need to depend on Social Security in retirement years.
Questions? Contact Midland IRA at 877-944-5472.