The vast majority of people reading this will never receive the benefit of social security for the purpose of retirement-unless of course serious adjustments are made in the current system. There are simply too many people living much longer than anticipated. At the same time, regardless of how much you've managed to pay into social security over time it is doubtful that anyone could live on the amount of money they would receive in social security benefits even if they had no other significant bills to pay such as house notes, car notes, or insurance on a home or automobile.
It amazes me that my grandparents managed to live on the modest sum that was earned from my grandfather's retirement and social security. They were never wealthy but in the last decade or so I understood just how little they had and yet they managed somehow to have all the things they absolutely needed in order to survive. I know that in the world of today, their meager incomes would not even begin to make ends meet for groceries let alone utilities and other necessities in life.
It is because of the struggles my grandparent's faced that I have devoted a good deal of time and effort into making sure that we do not go through those same challenges and struggles upon retirement. We have taken steps today to insure that we will have income throughout our retirement as well as a few carefully crafted investments to pull us through. I do not believe that I have all the answers and for this reason we have relied heavily upon the advice of our financial planner. He has helped us discover avenues for investing money and methods of doing so that have been nothing short of amazing for us as we watch our holdings grow year after year in preparation for retirement.
If you haven't taken the time to find a financial advisor for your investments there is no time like the present to do so. Even if you are nearing that magical number you might be amazed at the guidance and advice that can be offered by a competent financial planner to maximize your short and long-term investment and retirement planning needs. I believe you will be amazed at the financial miracles a good financial planner can work with even the most modest of investments with which to work.
You should also make sure that you take care of as many of the recurring bills as possible before you retire. It helps greatly if you have your home paid off and do not have the worry of a monthly mortgage payment. Another thing that is good to keep in mind is that you will want to downsize rather than upsize at retirement. Eliminate the second car and ride together when possible (this also eliminates an insurance payment as well).
If you are planning to move to a particular area of the country for your retirement you may want to begin now, as early as possible, seeking property in that area at a much lower price than you will pay ten to twenty years down the road when you actually get around to retiring. This will increase the likelihood that you either have your retirement home paid for or are very close to having it paid for. Another thing to remember is that you will want to get a smaller home for your retirement rather than a larger home that you will need to care for. This means you can eliminate some of the utility costs, which may prove substantial.
The most important thing to remember when planning for retirement is that it is your retirement for which you are planning. Make sure you set aside funds to make your retirement worth retiring for. Don't merely exist throughout your retirement because you can't afford to live, take the steps now to insure that this is not going to be a problem for your retirement years.
3 comments:
August 13, 2008 at 10:29 AM
Guaranteed Social Security Benefits: Make It So
The comically complicated PSA (Personal Savings Account) legislation bouncing around Congress will raise taxes, increase investment risk, and expand the size of government. Let's stop applying Band-Aids to spouting arteries. We are looking for a guaranteed retirement benefit program, and organizations capable of providing one. Additionally, we want the new program to reduce taxes, create jobs, boost the economy, cut prices, and increase salaries. Difficult? Not really.
This is the conceptual outline of a five-year implantation plan, a starting point for the brainstorming needed to develop the nitty-gritty details, rules, regulations, laws, and agencies. All that is needed is the will to change things productively. Politicians like to debate changes to determine why new ideas can't be implemented. Here's a plan that must be implemented. Have a listen, throw out an incumbent, and protect your future.
Guaranteed benefit programs have been around for over 100 years, and millions of people throughout the world enjoy the benefits they provide. Here's how they do it. Every month, they deposit money into a trustee-managed investment account. The money avoids the stock market (for the most part), index funds, commodities, or MLM-like derivatives and is carefully invested in high quality debt securities, many privately placed for better yields.
All earnings are reinvested in similar securities, and the fund eventually produces more in earnings than the participating investors contribute; the trustee manages the portfolio. At retirement, the deposits stop and the guaranteed benefits begin. The benefit is guaranteed for life--- extraordinary concept, older and wiser than any living congressman or presidential candidate.
What if, instead of donating 7.6% of your salary (15.3% if you are self employed) to support the war de jour: (a) you could choose to deposit from 3% to 5% of your salary in a guaranteed retirement program maturing anytime after age 60, (b) the lifetime benefit is totally income tax free, and (c) your employer uses his savings to either create jobs, raise non-executive salaries, reduce prices, or increase shareholder dividends. Interested?
The SSRIA (Social Security Retirement Income Annuity) is a new and improved version of the ancient Deferred Fixed Annuity--- a boring but guaranteed fixed-amount-only retirement vehicle. (Wrong, I don't sell annuities--- they just happen to be the perfect Social Security problem solver.) There are a bunch of new wrinkles: (1) The minimum contribution is mandated for all employed persons, but anyone with a Social Security number can have a SSRIA.
(2) Qualified (15 years of Fixed Annuity experience) SSRIA providors are assigned to participants randomly by SS#--- only one per participant, per lifetime, please. Since the "qualified-by-qualified-people" providor companies have no acquisition, retention, or advertising expenses, there are no sales commissions; administrative expenses and investment management fees are capped at .5% of the total fund Working Capital.
(3) All SSRIA contracts, regardless of provider, will contain the same terms, interest guarantees, retirement benefit choices, and pre-retirement death benefits, thus eliminating any incentives for internal fraud and manipulation of statistics.
(4) Qualified providers will establish separate tax exempt, "mutual" subsidiaries to manage and control operations, assuring that profits are distributed to contract holders. Profits are allocated 50% to active contract holders and 50% to a health insurance trust fund for retired participants (HITF). (5) All providers will use the same mortality, investment earnings, and expense assumptions in their annuity benefit calculations, and only Life and Life + One Annuities are available. (6) Benefit payments will be jointly guaranteed by the parent companies and the Federal Pension Benefit Guarantee Corporation. Parent Company income taxes would be reduced by 50%.
Implementation would be completed over a five-year period, and interpreted with an "intent of the law" bias:
In Year One, the Federal Government would purchase single premium SSRIAs for all active Social Security recipients--- hey, they squandered the money. Also in year one: (1) all employee and employer contributions would be cut by 25% (the first of four such annual cuts) and deposited to individual SSRIAs. (2) All Federal, State and Local income taxes on SSRIA payments would be declared illegal and forever prohibited. (3) A private company would be chartered to audit the disposition of corporate tax savings within all public companies and private companies employing 10 or more persons 18 months before enactment.
In Years Two through whenever, the Federal Government would add to retiring persons SSRIAs to bring the annuity benefit to the level guaranteed by the OASI plus COLAs. Once an equalization level is achieved, federal responsibility would cease for that retiree.
In Years Three through Five, all Federal, State and Local Income taxes on all forms of private retirement accounts (IRA, 401(k), 403(b), etc.) would be reduced by one third per year, and would be declared forever illegal at the end of year Five. A Federal Sales Tax of 1% or 2% (on all final-product-sales, not a VAT) could be enacted after the second year's cut. From Year Three forward, SSRIA holders would be able to view their projected monthly benefit at various retirement ages, based on contract provisions and their deposit and earnings history.
By the end of the Year Five: (1) Employers would have no Social Security tax responsibilities, but would be responsible for either employing more people, reducing their product prices, raising non-executive salaries not subject to the minimum wage, or paying higher dividends to shareholders. Any manipulations of their operations or executive compensation packages clearly intended to circumvent the intent of these reforms would be fined appropriately within the Board of Directors, senior officers, and legal council of the Company--- personally, and in each capacity.
That's right, if a senior officer is also on the Board, and responsible for controlling jobs, product prices, or dividends, he or she would be personally responsible for three separate fines. (2) Employees would select their level of salary deduction for year six; the election can be changed once in any twelve-month period. No employee can contribute more than the maximum 5% of salary to an SSRIA.
Of course there are a lot of ifs, ands, and buts in here, but it is a clearly doable program within an established professional infrastructure. It will increase jobs, reduce taxes, boost the economy and reduce the role of government--- in 50,000 less words and 25 fewer years than any approach even being considered in Congress.
Make it so--- yeah, you!
Steve Selengut
http://www.sancoservices.com
http://www.kiawahgolfinvestmentseminars.com
Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"
August 13, 2008 at 2:24 PM
This is so true. So many people are thinking that Social Security will be able to take them through retirement. I would also want to encourage people to put think about, and save for, some specific age-related needs you may have as you grow older. For example, will you need modifications on your home to accomodate your changing abilities to navigate around the house? Will you need to have a wheel chair ramp build? Modifcations to the bathroom? Will the doors be wide enough to accomodate a wheel chair? Will your curbs immediately around the house need to be modified?
Will you need additional help around the house? How will you pay for things that are not covered? How will you cover any deducatibles on medical expenses? If you are reading this and are still young, my prayer is that you would strongly consider and prepare for these events not only for yourself but for those whom you love and care for.
If this post has been a help to you in anyway won't you please visit my blog at http://www.ourstockmarketjourney.blogspot.com/ and make a small contribution to a current effort to build a wheel chair ramp for someone who needs it?
Be well.
October 5, 2008 at 10:45 AM
My grandparents have been retired for a while now, they struggled to live on Social Security for a long time and finally realized there were running out of the money they had saved and that the Social Security wouldn't cover all their needs.
Eventually another family member (who is a reverse mortgage agent) helped them to generate monthly income with the equity in their home while maintaining the title to their home as well as continuing to live in their home! It has worked out great for them and I urge any retirees needing more income to consider a reverse mortgage.
Visit http://www.apply4rm.com for information specific to your situation. They also have a great blog with a large resource of information at http://www.apply4rm.com/reverse_mortgage_answers.
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