Who is responsible for your retirement?

Urmas Lupkin Vice President Sales & Marketing
The short answer is you are! The bad news is there is a train barreling down the tracks and unlike Johnny Cash most Americans “don’t hear that train a coming”. On 4/29/19 the Trustees of the Social Security and Medicare Trusts released their annual report on the current and projected status of the two programs. According to the report “Both Social Security and Medicare face long term financing shortfalls under currently scheduled benefits and financing”. The report goes on to say “Both Social Security & Medicare will experience cost growth in excess of GDP through the mid 2030’s due to rapid population aging caused by the large baby-boom generation entering retirement and lower-birth-rate generations entering employment.” Simply put, this means that the ratio of people paying in versus receiving benefits is going in the wrong direction.
The only good news in this year’s report is that the Trustee’s project the combined trust funds will be depleted one year later than projected in last year’s report. The bad news is that it is still projected to go broke in 2035. Social Security’s total cost is projected to exceed total income as early as 2020. This is the first time since 1982 that this has happened. Benefits will continue to be paid out but they will be forced to start dipping into the trust funds reserves which will go broke in 2035 unless action is taken.
So what are “they” going to do about it? “The Trustees recommend that lawmakers take action sooner rather than later to address these shortfalls, so that a broader range of solutions can be considered and more time will be available to phase in changes while giving the public adequate time to prepare.” In other words, it’s up to our elected officials to fix.
If nothing changes, Social Security benefits will need to be cut by about 24% in 2035 to balance the books. Although this certainly could happen, there are also other potential remedies as well which include raising payroll taxes, increasing the full retirement age, decreasing benefits or a combination of these.
It has become more apparent that in order to secure a desired retirement, the burden has fallen on you to make it happen. For many years’ people could look forward to having a traditional pension that, when combined with Social Security, could provide a comfortable retirement. Unless you work in the public sector and have access to a government pension, those days have been gone for a long time. Some unionized employees still have access to a pension but most Americans do not.
The original purpose of Social Security was meant to provide a safety net but was never meant to be your only source of income in retirement. Currently, the average person only receives $1,300 per month in benefits. If that was your only source of income, it would be really difficult to make ends meet in this day and age. To get an estimate of what your monthly benefit will be in retirement you should go to www.socialsecurity.gov to download your personal social security statement on an annual basis.
Looking forward, now that you know the train is coming, there are steps you can take now to safeguard your retirement. If you haven’t started to save for retirement yet, start now! If you have started, keep going and try to put away even more. A good goal is 15% of your income. If you have access to a 401K plan at work, take full advantage of it. If there is an employer match, make certain you don’t leave any of that on the table. If you don’t have access to a plan at work, do your best to maximize your annual IRA contribution. For you folks in the public sector, the same goes for you, take full advantage of your 403B if you have access to one. If you are over 50 make sure you take advantage of the catchup provision which lets you put away more money in whatever plan you are working with.
Finally, if you don’t want to spend retirement feeling like you are “stuck in Folsom Prison”, make an appointment with a financial planner who can review your current situation to see how you are doing or to help you get started if you haven’t already. The earlier you start the better. You don’t want to do what our elected officials are doing and put this off any longer. After all, it is your responsibility!
Sgroi Financial is a full service, independent financial planning firm proudly serving the Western New York area since 1971. We offer services that will help you achieve your financial goals including retirement planning, investment management, estate planning, college planning and insurance. We help individuals, families, retirees, working adults, young adults and business owners.
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