In the previous blog posts, I discussed how the middle class in America is vanishing. Even though the unemployment rate is low (at the moment), for many people, wages are flat and have not returned to the levels seen before the 2008 financial crisis. This has adversely affected people’s ability to save money for retirement. In fact, according to new data by Northwestern Mutual, Americans are unprepared for the financial realities of retirement. Their research reflects that nearly eight in 10 (78%) Americans are “extremely” or “somewhat” concerned about affording a comfortable retirement while two-thirds believe there is some likelihood of outliving retirement savings.
These fears are for good reason. The reason can be seen in the alarming numbers below.
- One in five Americans (21%) have NO retirement savings at all.
- One in three Baby Boomers (33%), the generation closest to retirement age, only have between $0-$25,000 in retirement savings.
- Three-quarters of Americans believe it is “not at all likely” (24%) or only “somewhat likely” (51%) that Social Security will be available when they retire.
- Nearly half (46%) of adults have taken no steps to prepare for the likelihood that they could outlive their savings.
If social security is your only planned revenue source to live on during retirement then the third bullet point should have you worried. Indeed, based on the annual reports for 2018 provided by the Boards of Trustees for Medicare and Social Security there is cause for concern.
Not surprisingly, the numbers are pretty bad… and the reports plainly stated what our trusted politicians have been unwilling to talk about or address for years; the trust funds for both Social Security and Medicare are going to run out of money.
In the case of Medicare, the Board of Trustees project that its largest trust fund will be fully depleted in 2026, just eight very short years away.
For Social Security, the Board of Trustees’ report stated that the program will spend more money on benefits in 2018 than it will generate in income and tax revenue.
So this year, 2018, will be the first time Social Security has run a deficit since 1982.
But wait, it gets worse. According to the Trustees’ projections, the program will continue running larger and larger deficits until it too becomes fully depleted in 2034.
After that, recipients can expect at least a 25% cut in the benefits that they were promised and worked their entire lives to receive.
This is not my opinion. These numbers come directly from the Trustees of Social Security and Medicare (which includes the US Treasury Secretary).
There are only a few things Washington can do to alter this horrific outcome.
- Decrease your social security benefits at retirement.
- Push back the age of eligibility even further.
- Increase the withholdings of those that are currently paying into the system to support the program’s current recipients.
If you have recently retired or are only a few years away from retirement option #3 is your best outcome. But, even this won’t solve the problem in the long-term.
You see, due to the declines in population growth, there are no longer enough workers paying into the system to support the programs’ current recipients.
Social Security and Medicare can’t generate enough revenue to support their costs and will thus soon deplete their cash reserves.
The bottom line is this – you shouldn’t count on social security to support you through retirement. It doesn’t matter whether you spend your entire day at the nearest social security office speaking to someone about this looming problem or log into your my social security account by going to ssa.gov to check your projected social security benefit, it won’t change the harsh reality. The government is not going to save you!
Now is the time to begin planning for your future because 2034 is only 16 years away!
You should strive to have no less than three sources of retirement income.
In my next post, I will talk about ways you can start developing multiple sources of income that will support you through your golden years.