Last week i received on the mail my annual social security statement detailing how many years i have contributed, how much Social Security taxes i have contributed, earnings that i may receive … and lot more other details. Out of curiosity i checked the Social security website and these are some details i read from the site.
The current Social Security system works like this:
When you work, you pay taxes into Social Security. The tax money is used to pay benefits to:
- People who already have retired
- People who are disabled
- Survivors of workers who have died
- Dependents of beneficiaries
The money you pay in taxes is not held in a personal account for you to use when you get benefits. Your taxes are being used right now to pay people who now are getting benefits. Any unused money goes to the Social Security trust funds, not a personal account with your name on it.
This is not news but again according to the social security unless action is taken to strengthen Social Security, in just 13 years we will begin paying more in benefits than we collect in taxes. Without changes, by 2042 the Social Security trust funds will be exhausted.
It’s evident even from Social Security administration that – it may not be there for some of you reading this and most of your children and grandchildren!
How to prepare for retirement without social security
Get out of debt:- from my experience it’s almost impossible to save when you are in debt because the lenders will come knocking for their dues. Getting out of debt is not only a healthy financial plan but it also prepares you to start saving.
Save for emergencies: Because life happens with an emergency fund built, you will avoid going back to borrow money to cover for unexpected.
Invest your savings -understand the power of compound interest
Take advantage of all pre tax retirement benefits.
- Roth IRA for you and your spouse
- Company 401k or other plan that matches your contributions
Are you getting ready to retire without any social security benefits, or do you think it will still be there?