Social SecurityA Big Help For Retiree
The earlier you retire, the longer you are likely to live. While you need a significant amount of reserves in order to cover your annual expenses, Social Security can be a big help. Depending on your age, you can collect partial or full benefits.
For rough numbers, if you made $45,000 per year, you could expect Social Security benefits in the neighborhood of $15,000 per year. The problem with these benefits is that you wouldnt be able to collect them until you were 62 and you would still need a way to come up with $30,000 in annual income from your personal savings. That is just the tip of the iceberg of the problems with Social Security, though.
In 2004, President Bush enlightened us all to a potential collapse in the Social Security system. Looming on the horizon is the fact that 78 million Baby Boomers will be retiring. In a country of only 302 million people, that is a significant number of retirees. Couple that with the fact that currently there are 3.1 workers to support 1 retired worker, but as time progresses there will be only 2 workers to support 1 retired worker.
Federal Reserve Chairman Ben Bernanke said to Congress, Unless Social Security and Medicare are revamped, the massive burden from retiring Baby Boomers will place major strains on the nations budget and the economy.
To put all of this in context, we have to look at what Social Security is and what it isnt. It was established in 1935 by President Franklin D. Roosevelt. It was designed as social insurance that was funded by payroll taxes. This payment went to a trust fund, which would then redistribute benefits to the retired.
One of the key flaws of the system is the idea of calling it a trust fund. In truth, there is no actual capital in an account to make payments to beneficiaries. The program is a pay as you go program. So while we may have contributed to the program for years, our contributions are not set aside for us but actually paid out to current retirees.
The hope is that in the future there will be enough workers to contribute to the program, so that then retirees still will be able to draw benefits. Currently, $500 billion in benefits are paid out to 47.5 million people. Couple the fact that there will be a potential doubling in the number of beneficiaries, which would double the payments, with the fact that the money collected to shore up Social Security has been invested in special nonmarketable U.S. government bonds, and there is a sincere fear that there simply will not be enough money to continue retirement benefits as they currently exist.
Insolvency projections for Social Security range from 2018 to 30 or 40 years from now. Regardless of the when, the reality is that it will be more and more difficult to fulfill the promises of Social Security. The last time there was a potential crisis in Social Security of this magnitude, back in the 1980s, several reforms were implemented. Taxes were increased, the benefit age was raised, and Social Security benefits, up to 50%, became taxable.
These are some of the same solutions being promoted in todays environment. To understand the magnitude of the problem, currently 7% of the total U.S. economy is allocated to Social Security. In 2030, that number will increase to almost 13%, and by 2050, over 15% of the entire U.S. economy will be allocated to Social Security.
If the U.S. government were running a surplus, this drastic percentage growth would not be so alarming. The problem is that the government is running a budget deficit to the tune of $319 billion dollars a year. With no end in sight to the war on terrorism, this deficit figure does not look like it will be ending anytime soon.
The solutions to fix the Social Security system are not that appealing. If taxes are increased, we would effectively see an increase in taxes from 18% of the U.S. budget to 24%, driving us closer and closer to being a purely socialist state.
Privatization of Social Security is also touted as a potential fix to the problem. While plausible, it has little to no bearing on fixing the pay as you go system that has been in effect for over 50 years. In fact, it will exacerbate and speed up the need to use the U.S. Treasury bonds to pay current Social Security recipients, with the eventual need to find a way for the United States to honor those bonds.
Those who do have the new private Social Security system will then be responsible for their own investing decisions, even though many of them are currently having difficulties managing their current 401(k) s and IRAs.
Another potential possibility is to increase the age for Social Security distribution to 70, bumping it up from the current 67. While this, on the surface, will delay Social Security payments, it simply means that those who wanted to retire at the traditional age of 65 will be forced to work another five years, which means their private savings will have to sustain them even longer. Any increase in the normal retirement age will also mean there will be an increase in the age to receive limited benefits as well. If you are forced to retire earlier, you simply have to tough it out and fend for yourself.
None of the proposed solutions to shore up Social Security benefits represents a positive impact or solution for those currently receiving benefits or those Baby Boomers who will be receiving distributions in the future.
Conclusion
While none of these things by itself is a problem, it is the combination of a potential Social Security collapse, the changing idea of what retirement may mean, and the negative savings rate that makes it clear that traditional forms of investment, stocks and bonds, need to be supplemented with an alternative that can power boost your overall returns.
Futures and forex investing has the potential to do that for you. With the commensurate potential of boosted returns, you also have to realize that there is increased risk. When it comes to futures, you have the ability to lose what you put in and more, if you are not careful. When it comes to spot forex investing, you are trading on a 24-hour cycle. The speed and discipline you need in order to be successful at spot forex can take some time getting used to, before you ever are able to turn a profit.
When you look at the potential future of your long-term investment goals, the question you have to ask yourself is: Is the risk worth taking? Only you know the quality of life and lifestyle to which you have grown accustomed. Only you know what you expect from your investments. Only you know what standard of living you expect as you grow older. Whatever you do, take control of your fate and dont be a victim of the financial whims of others.
For rough numbers, if you made $45,000 per year, you could expect Social Security benefits in the neighborhood of $15,000 per year. The problem with these benefits is that you wouldnt be able to collect them until you were 62 and you would still need a way to come up with $30,000 in annual income from your personal savings. That is just the tip of the iceberg of the problems with Social Security, though.
In 2004, President Bush enlightened us all to a potential collapse in the Social Security system. Looming on the horizon is the fact that 78 million Baby Boomers will be retiring. In a country of only 302 million people, that is a significant number of retirees. Couple that with the fact that currently there are 3.1 workers to support 1 retired worker, but as time progresses there will be only 2 workers to support 1 retired worker.
Federal Reserve Chairman Ben Bernanke said to Congress, Unless Social Security and Medicare are revamped, the massive burden from retiring Baby Boomers will place major strains on the nations budget and the economy.
To put all of this in context, we have to look at what Social Security is and what it isnt. It was established in 1935 by President Franklin D. Roosevelt. It was designed as social insurance that was funded by payroll taxes. This payment went to a trust fund, which would then redistribute benefits to the retired.
One of the key flaws of the system is the idea of calling it a trust fund. In truth, there is no actual capital in an account to make payments to beneficiaries. The program is a pay as you go program. So while we may have contributed to the program for years, our contributions are not set aside for us but actually paid out to current retirees.
The hope is that in the future there will be enough workers to contribute to the program, so that then retirees still will be able to draw benefits. Currently, $500 billion in benefits are paid out to 47.5 million people. Couple the fact that there will be a potential doubling in the number of beneficiaries, which would double the payments, with the fact that the money collected to shore up Social Security has been invested in special nonmarketable U.S. government bonds, and there is a sincere fear that there simply will not be enough money to continue retirement benefits as they currently exist.
Insolvency projections for Social Security range from 2018 to 30 or 40 years from now. Regardless of the when, the reality is that it will be more and more difficult to fulfill the promises of Social Security. The last time there was a potential crisis in Social Security of this magnitude, back in the 1980s, several reforms were implemented. Taxes were increased, the benefit age was raised, and Social Security benefits, up to 50%, became taxable.
These are some of the same solutions being promoted in todays environment. To understand the magnitude of the problem, currently 7% of the total U.S. economy is allocated to Social Security. In 2030, that number will increase to almost 13%, and by 2050, over 15% of the entire U.S. economy will be allocated to Social Security.
If the U.S. government were running a surplus, this drastic percentage growth would not be so alarming. The problem is that the government is running a budget deficit to the tune of $319 billion dollars a year. With no end in sight to the war on terrorism, this deficit figure does not look like it will be ending anytime soon.
The solutions to fix the Social Security system are not that appealing. If taxes are increased, we would effectively see an increase in taxes from 18% of the U.S. budget to 24%, driving us closer and closer to being a purely socialist state.
Privatization of Social Security is also touted as a potential fix to the problem. While plausible, it has little to no bearing on fixing the pay as you go system that has been in effect for over 50 years. In fact, it will exacerbate and speed up the need to use the U.S. Treasury bonds to pay current Social Security recipients, with the eventual need to find a way for the United States to honor those bonds.
Those who do have the new private Social Security system will then be responsible for their own investing decisions, even though many of them are currently having difficulties managing their current 401(k) s and IRAs.
Another potential possibility is to increase the age for Social Security distribution to 70, bumping it up from the current 67. While this, on the surface, will delay Social Security payments, it simply means that those who wanted to retire at the traditional age of 65 will be forced to work another five years, which means their private savings will have to sustain them even longer. Any increase in the normal retirement age will also mean there will be an increase in the age to receive limited benefits as well. If you are forced to retire earlier, you simply have to tough it out and fend for yourself.
None of the proposed solutions to shore up Social Security benefits represents a positive impact or solution for those currently receiving benefits or those Baby Boomers who will be receiving distributions in the future.
Conclusion
While none of these things by itself is a problem, it is the combination of a potential Social Security collapse, the changing idea of what retirement may mean, and the negative savings rate that makes it clear that traditional forms of investment, stocks and bonds, need to be supplemented with an alternative that can power boost your overall returns.
Futures and forex investing has the potential to do that for you. With the commensurate potential of boosted returns, you also have to realize that there is increased risk. When it comes to futures, you have the ability to lose what you put in and more, if you are not careful. When it comes to spot forex investing, you are trading on a 24-hour cycle. The speed and discipline you need in order to be successful at spot forex can take some time getting used to, before you ever are able to turn a profit.
When you look at the potential future of your long-term investment goals, the question you have to ask yourself is: Is the risk worth taking? Only you know the quality of life and lifestyle to which you have grown accustomed. Only you know what you expect from your investments. Only you know what standard of living you expect as you grow older. Whatever you do, take control of your fate and dont be a victim of the financial whims of others.
