People are getting more and more worried and pessimistic about the future of Social Security. Beleve me even I was worried about my own retirement and how to get prepared without any help from Social Security or Government. Being rich you dont worry about such small changes and if you are poor govenment have all sorts of programs to help you but if you are in the middle to upper middle class Social Security is a very significant help to get retired with sufficient money.
In 1935 President Theodore Roosevelt started Social Security to help people from sudden job loss and poor retirement life. It was just after the Great Depression that US thought of havng a social insurance for its people. But Roosevelt was very clear while promoting the idea of social insurance saying, “”We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.”
Today in 2006-07 the problem is getting bigger as people have relied on government to provide for retirement and the government have shown signs of burden to support there citizens. It is time similar to 1930’s when different plans were proposed to develop a guideline to provide Social insurance to US citizens. It is not going to be simple as a very tidious process needs to be done to rewrite and renew Social Security program so that it can stay for a very long time.
Many countries in todays world have something to support there citizens and it is our time to learn about those plans and try to figure out how to change our plan so that it can support many more generations to come. In some countries there is government controlled private funds available in which you put your money and government takes care that there is no fraud and your money is invested properly. This seems to be a very good and efficient way to save for your retirement.
I went through some of the calculations and came to this wonderful results:
If you save 15% of your salary: Suppose your salary is $50,000 than 10% is about $420 a month. I will go with two scenerios:
1. If you get very conservative 5.5% interest for your money and you start your job at age of 25 then with $420 a month you will be able to save about $750,000 at age of 65. This is without considering any increase in contribution or any increase in salary. If your salary increases at a rate of 3% your contributions remain at 10% of your salary then you will end up with woping $1,080,000. This calculation considers a very nominal rate of return which could be obtained at even banks.
2. Other scenerio is if you invest your money and like in social security the company matches your contribution. So as per our condition if you invest 10% of your income and company you work for matches another 10% than in 40 years (From age 25 to age 65) you will have about $2,000,000 with nominal 5.5% interest.
After going through this calculations it does not sound that bad… Does it? Yes it requires a lot of descipline to save 10% of your income without touching it and historically Americans have lacked that descipline. But time has come when we have to have more faith on us than in governement.
I hope the social security stays for a while and we all can enjoy it but it seems harder and harder as our leaders are not showing enough commitment towards it. Foreign policies have taken away a lot of money that we pay in taxes and even though America is a democratic country and majority of people oppose war still President can do what ever he wishes!! Thats a whole different topic.
I wanted to write this article to reduce the stress people are feeling due to uncertainty of Social Security. It is possible to still retire comfortably with or without Social Security… So lets hope for the best and keep our fingers crossed till some final descisions are made for social security.
