Monthly Archives: April 2016

Numbers Don't Lie, Social Security

The Social Security Crisis

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Social Security is currently fully funded through 2032. And after the trust fund runs out the program faces automatic 25% benefit cuts for EVERY recipient.  Please read that again so we’re clear.  Those of you looking to rely on Social Security as a PRIMARY or even as a secondary means of retirement income need to seriously reevaluate that decision TODAY.

According to the SSA, Social Security has been running a deficit since 2010 and owes $11.3 Trillion more in benefits over the next 75 years than it will receive in payroll taxes. For more read this article by David C. John of the Roe Institute for Economic Policy Studies.

Some proposed fixes to the Social Security deficit are as follow:

  • Fix the annual cost of living adjustment to accurately reflect the best available inflation index. Using a ‘chained’ index would reduce the inflation amount by about 0.3% per year.
  • Increase Full Retirement age. People are living longer now. Full retirement age is now 67. It is suggested that full retirement age be increased to between 68 and 70 years old.
  • Focus Social Security benefits on those who most need them. This is a sore spot for some but the program was originally designed to protect seniors from poverty and economic hardship. It has been suggested that Social Security focus benefits on lower income workers by paying lower benefits to those with high levels of non-Social Security retirement income. Or even more drastic: Completely eliminate benefits for those with the highest amounts of non-Social Security income.
  • Increase Social Security taxes. We currently pay 6.2% of our earning into the Social Security system up to $117,000 of earned income. If that tax is increased to 7.2% by 2036 it would eliminate over half of the deficit.
  • Lift the payroll tax cap. The rich don’t pay Social Security tax on anything more than $117,000 of their incomes. If this cap was gradually eliminated  it would reduce the deficit by 71%.

This crisis is real. And if you live past 2032  you will be affected. I won’t even be 67 yet. So the legislation that passes on this subject is EXTREMELY important to me and YOU. We have to pay attention to this conversation and engage our lawmakers so the necessary changes are made to fix the Social Security crisis. DO NOT keep your head in the sand on this my friends. It’s too important. And it CAN BE FIXED if we stay engaged!

Late Starters, Pensions - A Dying Breed, Saving

It’s Never Too Late

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I was 40 years old when I first started thinking about retirement. I was married with two children but within a few short years my life changed dramatically. I was divorced and a single parent. My oldest son had graduated from the university and my younger son was in his last year of high school when he received a partial scholarship to college. I felt like I had hit the lottery.

With all that happening I had not lost sight of my desire to retire at 55. My employer offered a non-contributory retirement plan allowing you to retire at 55 years of age, with 30 years of service. If you met that criteria you would receive 50% of your salary for the rest of your life, but I knew I’d only have 25 years and therefore receive only 35% of my yearly salary.

I knew I needed a plan to reach my goal. The obvious answer was to save as much money as possible in the next 10 years. So I changed my lifestyle and put myself on a budget. Looking at where my money was going I realized the majority of it was being spent eating out. So I starting charging everything I bought. I didn’t care how small the purchase. I charged it on my American Express card. This way I could itemize how much I was spending and where it was being spent. With this knowledge, I then started to rein in the unnecessary spending.

Being a fan of Suze Orman, a financial adviser I saw on the Oprah show, I began following her advice regarding delayed gratification, and I joined my company’s 401(k) savings plan that had a 2% company match. In 1994 I increased my savings from 4% to 18% of my yearly wages. No matter how sensible with money you think you are there are times when your budget is at risk of getting hijacked. Putting my money in a less accessible place made it less likely I would use it in an emotional situations.

Saving for the future is difficult but it can be done. You should replace shopping and eating out with other joyful (FREE) activities like walking, doing yoga or listening to music. These activities will help you find your way toward your road to early retirement. I retired in 2004 at the age of 55 and I’ve enjoyed every minute of it!

-Jamie  S., Los Angeles, CA.

Best Practices, Saving

Starting LATE!

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First off, it’s okay.

No it’s not good. But there is hope.  This post is for all you late bloomers out there who are just now getting started saving for your retirement. And yes, we know it’s scary when you realize late in life that you haven’t prioritized your golden years but the key to dealing with the situation is to ACT! and act NOW!

  • If your employer offers any type of funds matching then you MUST at the bare minimum, contribute the amount required to receive the company match otherwise you’re leaving money on the table.
  • Next, you have to analyze your budget. You don’t have to hire a financial planner, but you do have to sit down and look at all the money that goes in and out of your bank account in a typical one month period.
  • Then you have to trim the fat. Anything that can be cut should be cut in order to free up money for your retirement savings.
  • Depending on your age you may be eligible to contribute ‘catch-up’ funds to your retirement account specifically to address the issue you’re facing.

PART 2

 

 

Numbers Don't Lie

Are YOU Ready?

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road-sign-1274312_1280The following post might scare you. But that is by design.

In July of 2013 the National institute on Retirement Security (NIRS) released “The Retirement Savings Crisis: Is it Worse Than We Think?” The study found that private sector retirement access is near its lowest point since 1979 with only 52% of employees in jobs that offer retirement benefits.  So half of America isn’t even in the position to take advantage of employer-sponsored retirement planning.

A critical finding of the report is that while households face a growing retirement savings burden, the typical US working-age household (age 25-64) has only $3,000 saved in retirement accounts while the typical household nearing retirement has only $12,000.

People of color are less likely than whites to have access to a pension or 401(k) at work. Nearly two-thirds of households of color have no savings in a 401(k) or IRA type account, compared to slightly over one-third of white households. Three out of four households of color (75%) have retirement savings less than $10,000. Among households of color with retirement account assets, the median balance is $30,000 for near-retirees — grossly insufficient as an income source.

If you’re not scared yet, you’re not paying attention…

PART 2