Turns out, the closer we get to the year of 2033, the more the concerns about the future stability of Social Security are imposing. The system, which was once considered to be the go-to place for older people to get the help they need, is now in a situation where it is impossible to make payments, facing a critical shortfall that could have an impact on the people in millions in the upcoming years. Recent reports have already shown that without intervention, Social Security benefits will be down by 17% by 2035 and the safety-net at that time will not provide everything that the retirees require of it anymore.
The Looming Crisis: Social Security Facing a $100,000 Shortfall
Over the next few years, the Social Security trust fund is expected to get depleted to such an extent that it will still be capable of meeting only 83% of the payouts. While there is often a lot of exaggeration about the idea of Social Security going bankrupt, the fact is that a sharp cut in benefits is imminent. The ones that are now getting $1997 a month on average as a benefit are risking a loss of about $340 monthly which is a significant amount for those retired who rely on these funds.
Younger generations like Gen X and Millennials are overly worried when it comes to the fear of not receiving the same benefits as retirees in the future. A recent study points to this fear to show that as few as 28% of Gen X and 31% of younger Americans express their confidence in securing the same benefits as those currently in retirement, a figure entirely different from the one seen in older generations.
The Financial Gap: How Much More You Need to Save
To address this imminent deficit, financial gurus are advising to save $100,000 or more, depending on your age and the time you have to endorse your the retirement fund. The most crucial aspect here is to start at the start. The earlier the save begins, the less the monthly contribution will be.
For example, here is an age-based perspective on how much more you will need to save:
- Aged 55: In the case where you have a mere 12 years to retire, you may have to increase your monthly contribution by $519 or $6,158 annually additionally.
- Aged 45: With 22 years left, simply an amount of $211 per month or $2,528 per year could cover up the deficit.
- Aged 35: If you happen to save the funds early you have the benefit of saving for a longer duration of time. With as many as 32 years left, as little as $107 monthly or $1,282 per year could do.
- Aged 25: Had it been that you are in your twenties, it would be the most perfect timing to save as much as $59 monthly or $708 annually for 42 years will help fill the void.
How to Save More: Steps to Secure Your Financial Future
Despite the uncertainty that looms over Social Security in the coming years, there are actions that you can do today, which are guaranteed to grow your retirement kitty:
- Try to fully utilize your retirement accounts: By depositing as much as you can in your 401(k), IRA or other retirement accounts, you will ensure your financial independence. If you pass your 50s, make the most of catch-up contributions to increase the savings.
- Grab the opportunity of matching contributions: Do not be satisfied with what you get but rather chase for a bigger mirror. Make sure you are saving enough to match or even surpass your employer’s contribution.
- Consolidate Retirement Accounts: It is easier to keep track of your money and cut the charges from several accounts when you have fewer retirement accounts to manage.
- Invest Wisely: The idea of forming a diversified investment portfolio is fundamental in wealth accumulation. Think about the combination of stocks, bonds, and other assets which can help you to get an exposure to various risks and thereby, take advantage of long-range growth opportunities.
Public Sentiment: A Nationwide Call for Action
The Social Security problem has not been underestimated by the American public. The latest research indicates that people from different races, occupations, and age groups in the U.S. are worried about the sustainability of the system. The survey has identified that a total of 64% of U.S. population fear the possibility of outliving their retirement savings, a concern that has been worsened by the Social Security issue.
It is really a matter of interest that Americans in general have a common ground in their demand to bring changes. A poll disclosed that 86% of Republicans, 88% of Democrats, and 88% of Independents were of the same opinion that the government should take necessary steps immediately to solve the issue of the trust fund’s lack of money.
What Can Be Done to Fix Social Security?
Though the path to strengthen Social Security is yet unclear, some analysts are positive that a set of policy adjustments could be in use for that purpose. Most notably, the plans to increase the retirement age, take an extra payroll tax, or introduce means-testing for benefits are likely to be the most appropriate. Nonetheless, these solutions are dependent on the cooperation between political parties, and policymakers’ willingness to make hard decisions.
At present, people should save money for the future on their own as well as be aware that their future profits might get smaller. The initiatives that you start now could have a significant effect on your life when you are a retiree.
