Most mainstream economists, including those who published the Social Security Trustees Report, who have done calculations as to how long the Social Security trust fund can last believe that we’re moving in a very negative direction, and that the trust fund which holds excess Social Security dollars that is currently paying many of our current retirees will be completely gone by the year 2042. If you plan on retiring any time after 2030, chances are you won’t be seeing your full Social Security benefit during your retirement. You just can’t trust the government to take care of you when you retire, it’s time for us to take responsibility for our retirement plans and not depend on Social Security.

Since Social Security’s future is rather shaky and we simply cannot depend on receiving our full benefit, we have to supplement that money by saving for retirement on our own. Fortunately because of the power of compound interest, we can put a small amount of money away each month and over time that money will grow and snowball to be a significant chunk of change by retirement.

For example, if you were 25 and invested $100 a month into a decent mutual fund, you would have a pile of $500,000 by the time you retired. That would be plenty of money to supplement your Social Security income and allow you to avoid an impoverished retirement. If you save any more than that, you could even improve your lifestyle when you retire.

When you are doing your retirement planning, you should put your money inside of your company’s 401K plan if they offer any sort of match or into a Roth IRA. Either of these vehicles will allow for growth without having to pay taxes on your earnings every single year. If you’re not terribly familiar with the issue of finance, it’s definitely worthwhile to sit down with a fee-only financial advisor and have them look at the options you have for retirement. They will be able to help you come up with a plan that will allow you to retire quite comfortably by doing some simple planning ahead.

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This entry was posted on Friday, December 7th, 2007 at 11:37 am and is filed under Money General Talk. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.