You are on page 1of 7

Retirement 1 Running head: RETIREMENT

Retirement Social Security and Savings By Tania Ballard MG 411: Compensation and Benefits Instructor: Gary J. Valcana June 17, 2011

Retirement 2 Retirement Social Security and Savings Even in 2008, Phoebe Liebig, et al., reported in an article that, the time has come for economic well-being and security of older Americans to once again be the central issue in aging policy (p. 27). Today, retirement and savings for the future can be very challenging for many workers. Workers are struggling to save for retirement, and the future of our economy is filled with uncertainty about whether their savings will be enough even to pay for basic expenses. Therefore, start saving for retirement today, it does not matter if you are 21 just finishing college and going into the workforce. Jae Song, et al., (2007) defines a person who is entitled to Social Security benefits as one who has filed a claim for a specific type of benefit and has received an award for that benefit (p.2). Given the current economic environment and outlook for the ultimate collapse of Social Security, its critically important that when an individual is ready for the workforce, they must begin to prepare for retirement as well. The current retirement and saving plans is a major challenge today. No one knows what the future will hold as far as the world's investment markets and economy go. The Social Security Administration website, states the following information about Social Security, helps not only older Americans, but workers who become disabled and families in which a spouse or parent dies. About 160 million people work and pay Social Security taxes and about 52 million people receive monthly Social Security benefits (2010, Social Security: a simple concept, para. 1-2). It was Congress that chose that the payroll tax rates to be higher, than pay-as-you-go levels and Congress also built a trust fund that would be used for Social Security benefits that had both principal and interest that helped build the trust fund up. The Social Security program, pay-as-you-go, is a structured system that pays beneficiaries out of the current worker payroll

Retirement 3 contributions (Svihula et al., 2007, p. 80). The purpose of the pay-as-you-go plan was that the baby-boomers would be in the workforce, then at retirement the payroll taxes rates would be lower than pay-as-you-go plan. In an article written by Rob Strand (2005), it is stated that, according to the Social Security Administration, starting in 2018 projected benefits paid to retirees will exceed projected payroll tax revenues, and the forecast says that shortfalls will continue to grow thereafter (p. 7). While no one really knows the exact date to when Social Security will start declining, but it is a known fact that it will eventually be gone if changes are not made. The changes that could be made are ones that will hurt the working man today because it all boils down to raising taxes, then reducing the benefits and eventually requiring the retirement age to rise. But it is known by everyone that a change must be made because there seems to be more workers retiring and collecting Social Security, than there are workers paying Social Security taxes. Michael FitzPatrick (2008), talks about the safety nets once believed to be so securepension income, Social Security, Medicare, and Medicaidare no longer as dependable as they once were (p. 46). In another article it is shown that in a 2009 annual report to Congress, the Social Security Trustees estimates that unless major changes are made, the Trust Funds will be exhausted by 2037 (Ervin et al., 2009, p. 314). The advantages that a couple has when they begin to retire is that if they spread out their retirement dates, then maybe they will be set financially and then emotionally they will be able to handle being together every day. During the research it has shown that when couples that retire at the same time have problems with knowing that for the rest of their lives they will be with their companion every day. Then at the same time the retiree realizes that they no longer have a job to go to every day, emotionally these things can be hard on an individual. Financially speaking, the advantages are far better if a couple spreads out their retirement. During the

Retirement 4 research on retirement, Social Security and savings, there was a statement made in The Financial Services Review by Michael Tucker in 2009: Couples deciding on retirement have a more complex decision set than single prospective retirees do. Life expectancy discrepancies between men and women make the longerlived spouses life expectancy the dominant consideration. Age differentials between spouses are also of importance particularly because wives are typically younger than husbands further extending the joint life expectancy of the couple. Social Security payments may differ between spouses as well with each able to obtain higher payments if retirement is delayed (p. 249). When the couple decides to retire, the amount of Social Security benefits will be larger if one spouse decides to work longer. In addition, with income coming in from the spouse that has decided to continue to work, the couple has several more years to put away for retirement. If the spouse that has decided to continue to work works an extra few years they will be allowed to withdrawal a larger amount each year of retirement. Saving for retirement is very hard and it is even harder when youre a single parent with two children, therefore, when there is a couple saving for retirement, it makes life somewhat easier. Take, for example, a higher-income husband with a lower-income wife. If the husband has no reason to expect longevity, he may be inclined to begin collecting at age 62. This means that his wife will collect reduced survivor benefits when he dies (Thomas, 2009, p. 32). When the couples that are ready for retirement spread out their retirement dates, they will be able to transition easier both financially and emotionally. A very important decision that all retirees in the United States face is when to begin collecting Social Security benefits (Atkins et al., 2009, p. 25).

Retirement 5 There is no easy fix for Social Security, no miracle accounting that will painlessly fix the problem posed by the 70 year-old national retirement system (Duke, 2005, p. 20). Therefore, it seems like there has to be a plan that will work to help the average worker retire and be able to live comfortably doing it. President Bush promoted a concept of Personal Saving Accounts (PSAs), which would allow individuals to invest a portion of their contributions to Social Security, in stock and/or bonds (Strand, 2005, p. 7). But even with this plan, it seems hopeless, unless the banks and government come to some sort of agreement on who will control what. Also with this savings plan along with the 401(k) plan, the worker has the option to put their money in it. When a couple or individual decides to retire, they must realize how difficult and costly this stage of life will be. When one goes out into the workforce, they should begin preparing for retirement and start contributing to their retirement savings because it will be time to retire before they realize it. Therefore, knowing this, one should consider increasing the amount of contribution so that their savings starts to grow. Therefore, the time to start saving for retirement is now, no one knows what the future of our economy holds.

Retirement 6 References Atkins, A., & Caliendo, F.. (2009). Strategies for maximizing Social Security benefits. The Journal of Wealth Management, 12(1), 25-31,7. Retrieved October 6, 2010, from Banking Information Source. (Document ID: 1734069191). Duke, B. (2005). Social Security's easy fix. American Bankers Association. ABA Banking Journal, 97(2), 20. Retrieved October 6, 2010, from Banking Information Source. (Document ID: 794700651). Ervin, D., Faulk, G., & Smolira, J.. (2009). The impact of asset allocation, savings, and retirement horizons, savings rates, and social security income in retirement planning: A Monte Carlo analysis. Financial Services Review, 18(4), 313-331. Retrieved October 6, 2010, from Banking Information Source. (Document ID: 2085743701). FitzPatrick, M.. (2008, December). No Pension + Social (In)Security + Caregiving = Financial Crisis: What are Baby Boomers supposed to do? Life Insurance Selling, 83 (12), 46,48,50,52. Retrieved October 6, 2010, from Banking Information Source. (Document ID: 1616960021). Liebig, P., & Cicero, C.. (2008). Economic Well-Being and Security of Older Americans: State Approaches and Innovations. Generations, 32(3), 27-33. Retrieved October 26, 2010, from Research Library. (Document ID: 1862957431). Social Security Administration (2010, January). Understanding the benefits. Social Security: a simple concept. SSA Publication No. 05-10024. Retrieved from http://www.socialsecurity.gov/pubs/10024.pdf.

Retirement 7 Song, J., & Manchester, J. (2007). Have People Delayed Claiming Retirement Benefits? Responses to Changes in Social Security Rules. Social Security Bulletin, 67(2), 1-23. Retrieved from Business Source Premier database. Strand, R. (2005). A banking view of Social Security's financial problem. American Bankers Association. ABA Banking Journal, 97(4), 7,72. Retrieved October 6, 2010, from Banking Information Source. (Document ID: 821248681). Svihula, J., & Estes, C., (2007). Social Security Politics: Ideology and Reform. The Journals of Gerontology: Series B Psychological sciences and social sciences, 62B(2), S79-89. Retrieved October 26, 2010, from Research Library. (Document ID: 1246382431). Thomas, F. (2009). Social Security for Two. Journal of Accountancy, 207(1), 30-33. Retrieved from Business Source Premier database. Tucker, M. (2009). Optimal retirement ages for couples considering Social Security payments and withdrawals from private savings. Financial Services Review, 18(3), 249-260. Retrieved October 6, 2010, from Banking Information Source. (Document ID: 1967979281).

You might also like