Retirement is not an age

Retirement for these days is more of a dollar amount than an age these days. What I mean when I say that is, just because you are 65 doesn’t mean you can retire and not work another day for the rest of your life. Thus we have Wal-Mart greeters. You need a certain dollar amount to still come in on a repetitive basis, such as social security to officially retire. But, there is a problem with relying on social security. It is projected that in 2017 the social security administration (SSA) will be paying out more money than it is taking in. This is due to the number of children born during the "baby boom". Also it is estimated that in 2041 the SSA will not be able to payout benefits at promised levels. Meaning for those of us who are 40 years of age and younger will be greatly affected by this. For example, current SSA benefits for a retiree are $1200-$1600 per month. Not exactly a lot of money these days. Lets move forward to 2041, but assume that there has been no inflation since 2005, and you were born in 1975. So you are now 66 years old. Due to the social security slowly running out of money the are only going to give you a check for $900 per month. Is this enough money to live on? I think not.

Here is a quote by Treasury Secretary John Snow--
"The numbers leave nothing to doubt about the financial condition of the social Security system. The report underscores the fact that we need to do something."
(http://www.centredaily.com/mld/centredaily/news/politics/11212882.htm)

How do we remedy this you might ask? Well, there are a few ways. We could have budget cuts to pull money from other programs, or maybe raise federal taxes to make up the difference. A strikingly different conclusion, however, was drawn by critics of president bush's proposal to transform social security by allowing for the creation of private accounts. Meaning the money they take from your paycheck goes into a personal fund instead of the general SSA fund. Over the last 8 months I have been educated on a similar principal while working as a financial advisor for Primerica, a division of Citi Corp. How it works is you save for retirement yourself using qualified retirement accounts that give special tax deductions. Examples are a 401k or an IRA. So, instead of relying on the federal government to help support you during your retirement, you support yourself. Therefore you do not rely on the SSA to pay you $900 per month. Instead you learn how to have a retirement account that pays you $2500 per month plus the $900 SSA can pay you.

Just to use myself as an example. I am currently 24 years old. Assuming that my home is paid off I want to retire in 35 yrs, and I feel that I could easily live off of what is now $2000 a month. In 35yrs I will need more like $13200 per month due to inflation. To do this I need to save $3000 per year for the next 35 yrs in a mutual fund. Assuming I get a 10% rate of return. I will have approximately $2.3 million dollars. Which will allow me to live another 30 yrs without having to worry about money or having to work. The biggest mistake you can make is assuming you don't have any money to save. If you earn an income, it's simply a matter of how you're spending it. You can put some money aside each month — if you make saving for your future a priority. The longer you wait the more money you will need to save each month to make up for lost time.If you begin saving for your retirement early in your life, you'll have to put aside much less money each month. If you wait until you're nearing retirement, the amount you'll need to save each month could be near impossible.