You weren't really going to rely on Social Security in retirement were you?
The truth is, nearly 9 out of 10 retirees1 do and it represents about one third of their income in retirement. As of 2021, 65 million people are currently receiving some form of social security benefits. That's almost 20% of the country!
Well are you ready for some great news...
The Treasury reported today (August 31st, 2021) that the Social Security trust is going to now run out in 12 years, one year earlier than initially expected.2
Now for many of the younger generations, we were expecting this. I joke with clients under the age of 40 that it may get us a cup of coffee when we retire, but I may have to retire that joke because it might not even get that.
Fortunately, most of my clients have time on their side before they are planning to retire. This is the time to plan and prepare so we aren't scrambling to try and figure things out on the back end when retirement is only a few short years away. At that time, it's too late.
So how do we make up this significant 33% drop in retirement income?
Well there's a couple things we can do.
One, we need to be saving money. That's a given, but it's not always the easiest thing to do. I'm fortunate enough to work with many clients who already do a good job saving around 10-15% of their income. Now that's a good start, but it may still cause most people to fall short of the life they desire in retirement. Don't believe me? Then let's run your numbers and see.
That's why I teach a cash flow system to my clients, so that they can save the right amount of money without seriously sacrificing their lifestyle. It's really easy to implement and it works.
Two, while were young, we need to be taking calculated risks. Key word - calculated. That doesn't mean trying to find the next hot stock to gamble money on in hopes we hit the jackpot. We're not at the roulette table at the Bellagio. Building wealth is a process, and over the last 123 years, my firm has been able to develop a process that works. Growing money takes time, and when you are young, that's one of the most valuable assets you have. Don't let it go to waste. Saving small amounts along the way can add up to massive impacts down the road.
Three, and this is going to ruffle some feathers, I know. STOP PAYING OTHER PEOPLE BEFORE YOURSELF. That may be one of the most controversial things you have heard in the last 18 months, huh? Hopefully not. I don't want people to read that and think that I want them in debt forever. People who rush to pay off debt so fast miss one of the most overlooked financial tools in their arsenal when they are young. The power of compound growth. At a 6% rate, it only takes $2 million 7 years to grow to $3 million. The problem is, it takes saving $1,000 per month and growing that at 6% for 30 years to get to $1 million. So the longer you delay, the later in life you'll have to go through those first 30 years. It's just math.
So with Social Security potentially out of the question for most of us now (unless they start increasing the social security and medicare taxes they take out of paychecks), what can we do?
Save. Take calculated risks. Pay yourself first. I'd love to teach you my cash flow system and help you think through other savings decisions. There are incredible opportunities in front of us if you know where to look.
To learn more about what I do for my clients and how I am helping my clients work towards becoming 100% reliant upon their own assets for retirement, send me an email at blakemiller@ashfordadvisors.net or book a meeting and I'd love to talk.
We can do this, but we have to start now!
Resources:
1https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf
2https://www.cnbc.com/2021/08/31/social-security-trust-funds-set-to-be-depleted-sooner-than-expected.html