If you were planning to depend solely on the government to provide for your retirement, you might want to reconsider. Social Security, the program that we pay taxes into each year to provide money in our non-working years, has been known to be in trouble for a long time. Recent projections have the system running out of enough money to cover promised benefits by 2037. Beyond that, the rate of return that you receive on your “investment” is very low.
Recently, I came across an article that had a study by the Urban Institute that found you actually do receive a return on your Social Security taxes. But after you dig deeper you find that return is not much, if any at all. For a male who earns the average wage ($43.1K in 2010) and turned 65 in 2010 they will have paid $290K in Social Security taxes and receive $256K in lifetime benefits. When you include Medicare benefits, the total taxes paid increases to $345K with total benefits received of $417K. The payoff however is projected to decline for future generations. The same male who earns the average wage and turns 65 in 2030 will have paid $392K in Social Security Taxes and earn $318K in benefits. With Medicare factored in, you would pay $476K in taxes over your lifetime and receive $569K in benefits or an annual rate of return of about 1%.
In the wake of these stats what should you do? Take charge of your own retirement today. By taking control of your retirement funding you control how much you invest and how it is invested. You will get a much better return and have more money to enjoy in your retirement years then what the government will provide. By using the monthly savings spreadsheet on our free financial resources website, you can see that if you invest $500 a month for 40 years and average 10% growth a year, you will have close to $3.5 million when you retire! The bottom line is this: the best person to take control of your future nest egg is yourself, not the government. Just invest your money like it all depends on you, and whatever you receive from Social Security will be gravy!
If you need help setting up a financial plan so you are able to retire comfortably, please get a hold of us today to set up a consultation.