Social Security has been a hot topic during this election season. Many politicians have discussed raising the age at which individuals become eligible to receive Social Security benefits. Members of Congress and Congressional candidates have suggested raising the age of Social Security to 70.
But will the social security age be increased? Well, consider that the baby boomer generation is set to retire, which will place a major strain on the Social Security system. The government has borrowed from the Social Security fund throughout the years and now the time has come to pay the piper. The key problem is that Social Security will pay out more benefits than it has received in payroll taxes this year, and this is expected to continue into the next few years. In fact, according to many economists, Social Security is expected to regularly operate with an annual deficit in the foreseeable future.
As a result, it appears that changes to the Social Security system are inevitable. The government may have no choice but to postpone the age at which people qualify for Social Security benefits.
Since the social security age is out of your control, here are three ways to prepare for any potential changes:
1. Calculate your retirement needs.
According to the Department of Labor, only 43% of Americans know how much money they should be saving for retirement. You can get a leg up by estimating your retirement needs. Determine the amount of money that it will take to maintain your current standard of living. All you have to do is add up your monthly expenses and adjust it for inflation. Factor in a 3% cost of living increase and you should be well equipped to deal with your retirement needs. If the retirement age is increased, you already have the formula down, so you will just need to adjust to account for the longer amount of time you may be working. Alternatively, if you retire at a pre-retirement age, then you’ll have to factor in getting limited or no Social Security benefits for those years.
2. Max out your retirement plan.
Stocking up money in your retirement plan is more important than ever. In addition to Social Security running at a deficit, Social Security has also been frozen at its current level for this year, and therefore there will be no cost of living adjustment for seniors. This trend may become commonplace in the future. Furthermore, the death of the pension plan has caused many retirees to lean more heavily on Social Security. As a result, if you have not yet reached your retirement age, you need to start focusing on your personal retirement fund such a Roth IRA plan or your company-sponsored 401k retirement plan if one is offered. Try to contribute as much as you can to these funds; you’ll reap the benefits during retirement.
3. Pick up long term care insurance.
Most Americans are living longer than they every have before. It’s possible that you could live well into your nineties. One of the ways that you can prepare for your future is by buying a long term care insurance policy plan. Long term care covers costs that Medicare and other health insurance policies don’t pick up. Long term care insurance covers things like nursing home care, home care, assisted living, daycare, and hospice care. It’s best to purchase a long term care policy before retirement age as premiums get significantly more expensive with age.
Are you counting on Social Security to meet your retirement needs? Do you think that Social Security will still exist in its current form when you retire?
(Photo credit: Fabricator of Useless Articles)