The majority of American’s do not invest or save enough money for retirement. They depend on social security checks to get by. But who funds social security and what happens if we run out of money? Social Security checks are funded by the previous generation. That means the social security money coming out of your paycheck each month is paying for America’s current retirees. As long as there are more working people than retirees, the concept works.
COVID-19, declining birth rates, and an aging population has caused millions of job losses. This means that American’s are being paid more money in social security than is being collected. Back when social security started in 1935, there were about 150 workers for every retirees. Today there are only 3 workers for every retiree. You might say that 3 workers is still more than 1 retiree, so what is the problem? Over the years, excess social security was put into a trust fund. Today that trust fund has about $3 trillion. Because the current generation does not get paid as well as the previous one, and thus pays less payroll taxes, the social security administration has been pulling money from the trust fund to pay current retirees. The latest projections are showing that we will deplete the $3 trillion trust fund by 2033. That means most of us alive today will be affected by what’s to come. It is currently estimated that social security benefits will decrease by 25% when we deplete the trust fund in as little as 10 years from now.
With the average social security monthly check around $1400, a 25% cut would mean $1050 per month. That is not enough to cover rent let alone living expenses in most cities. Millions of retirees would be expected to lose their homes or be unable to afford medication or healthcare. Again, this is happening in 10 short years.
Take Action Now
Congress has been avoiding the problem because it would mean raising taxes or cutting benefits. I say communicate to your elected representatives and get them to take action now. With social security quickly failing, it is important now more than ever to save, invest, and create passive income streams. Read my posts on Passive Income to learn how you can earn more money. If you have not started an IRA or investment account, it is never too late. Consider opening an account for passive investing in a Traditional or Roth IRA with one of these financial institutions:
- Click here to join Betterment, the Smart Money Manager and get the first $5000 managed free for a year.
- Make Wealth your Own with Wealthfront and get the first $5000 managed free for a year.
- Join M1 Finance, the most customizable investment portfolio and get $30 when you deposit or invest $100.
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