Justify
Social Security - Don't Save for Retirement
By Kemberly Wardlaw
It
is a common question when investors review their retirement plan—should
we include social security benefits into our retirement income projections?
It
seems the closer an investor is to retirement, the more likely he/she
will include social security benefits into the analysis. Younger
investors, however, may feel compelled to omit such benefits. They
must then become mavericks on the retirement front. The choice is
yours, but before you decide the influence of social security on
your future, remember the following points:
When
Franklin D. Roosevelt signed the social security act in 1935, he
stated that social security gives some protection to American families.
One reoccurring theme of his statement focused on assistance, not
100% protection. In the President’s words, “the law will flatten
out the peaks and valleys of deflation and of inflation (source:
http://www.ssa.gov)
For
many, the Social Security Administration has raised the age of full
retirement from 65 to adopt a more stringent schedule. This may
be an addition of a couple of months or a couple of years. The administration
justifies the increases due to longer life expectancies and general
healthier life styles.
For
example, those born after 1960, your full retirement age is 67.
Going forward, we should ask ourselves “what other changes will
be made to social security?” If you would like a complete schedule
of retirement ages for full benefits, I recommend you visit Social
Security's website at http://www.ssa.gov
An
opinion adopted by many is to consider social security in part the
closer you are to retirement. For example, if you are sixty years
of age and plan on full retirement in five years, you should consider
an analysis based on your current projected benefits. Even with
the proposed reform plans, preservation of benefits is a priority
for eligible citizens age 50-55 and older.
If
however you are thirty, it may be better for you to omit such projections.
The result will be overfunded personal savings. Thus social security
will be an added benefit and not the benefit.
Consider
the troubling issues of the 2004 OASDI Trustees Report: future scheduled
benefits for today's young workers could be reduced by 27% or more
if amendments to the current plan are not adopted.
Young
workers should take note of this report. Do not rely on social security
and concentrate on personal savings.
In
conclusion, you have a risky option—there is only one way to justify
social security, don't save for retirement. If this is your chosen
route, be prepared for difficult times ahead.
About
The Author
Wardlaw's
belief is that familiar life elements best illustrate practical
investment strategies; not typical investment jargon. With that
philosophy, the author assists financial planners / advisors, brokerage
firms, periodicals, and other investment information syndicates
create informative and entertaining articles. For comments and questions,
please contact the author at mailto:tools2invest@yahoo.com.
