Is an Additional Retirement Plan Needed Aside from Social Security?

Many individuals approaching retire­ment age may depend on Social Security as their primary income source. With the things people are hearing about how underfunded the system is, it is not unusual that doubts abound on how secure our Social Security really is.

The most estimable matter that anybody can do is offer an opinion on the financial competence of the Social Security system.  As of now, those who are already receiving benefits will be covered to the extent of the government's capacity.

The potential problems for them are twofold: first off, inflation can easily devaluate any fixed income retirement plan. Social Security has a built-in cost-of-living adjuster, but any extended inflationary cycle would almost certainly involve necessary modification. This can happen if the government is deficient in funds to override double-digit inflation. Second, the trend in Congress is aimed at shifting costs, such as Medicare, to the recipients and taxing benefits at a later date. Either of these can create mayhem when you're living on a limited income.

If a married retired couple will both be living off on retirement benefits, and one faces death, the survivor may have to deal with inade­quate income to fund the daily needs. It would be best to have another income source, such as a part time job and formulate a sav­ings plan that could eventually provide extra income outside of Social Security.

For younger workers just getting into the system, the future of Social Security cannot be fully depended upon.  If there will be fewer new workers contributing to the sys­tem, and recipients are living longer, this would cause a big problem if not remedied by the government.  It is almost certain that retirement ages will be pushed back, and benefits will be cut down beyond in a few decades from now. In 1935 the system started with seventeen contribu­tors for each recipient. By 1980 it was seven to one, by the year 2000 about four to one. If this trend stays, by 2025 there will be only two contributors for every recipient.  The worse that could happen is that, the system will be bankrupt earlier than expected. It is just sensible for anyone to have an alternate retirement plan.

© 2011 Athena Goodlight

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