With the first wave of Baby Boomers heading into their late 60s, retirement is something on more than 78 million Americans’ minds. At this same point in time, however, the country is barely crawling its way out of the Great Recession—an economic disaster that helped sweep thousands if not millions of dollars right out of the 401(k) and IRA nest eggs these soon-to-be retirees had been counting on.
Some may say naively, “Well, that’s okay. At least they have Social Security to fall back on.” But Social Security doesn’t provide enough for most aging Americans to cover everything from housing to health care, let alone their dreams of spending days on the golf course, traveling, and philanthropic giving. And … it’s something that’s in peril.
As of a few years ago, if the Social Security system did not bring in new money to cover current recipients’ income, it would have been bankrupt in about three months. In other words, if the government weren’t able to collect Social Security from wage earners for a solid three months, the system would have been broke.
This is especially disconcerting when you realize all those Baby Boomers will continue to stream toward retirement over the next 15 years. What’s worse, the upcoming workforce is smaller than it has ever been. When Social Security was introduced, there was one recipient for every 60 workers. Within just a decade or two, it went down to one recipient for every 15 workers. In 1986, it was at one worker for every six recipients. In five to 10 years, if things keep going the way they’re going, it’s going to be down to as low as two workers for every one recipient. That’s two wage earners pulling the wagon for every one person in it!
The Social Security debt is in the trillions. If you have trouble imagining the scope of even one trillion, visualize $1 bills lined up end-to-end from here to the moon and back—200 times! That image gets even more overwhelming when you learn the federal government has obligated itself to pay even more – with money that it has not yet collected (by withholding from American workers’ paychecks). The government doesn’t have the money to cover its expenses—and the only way it can get it is by withdrawing money from our paychecks next month. This would be like us having a big $700,000 mortgage, and if we suddenly became unemployed, we would only be able to go about three months before we’d be homeless.
The reality is, we’re going to have more and more people in the wagon with fewer and fewer workers pulling. The government estimated its current approach wouldn’t catch up to it until the 2040s—that was, until the financial crisis we’ve recently found ourselves in. Now that day of reckoning could come in as few as ten to fifteen years. Or…now.
So the question for every American is: How can you take better responsibility for providing for your own retirement needs, without relying on Social Security as a fallback?
The answer is: Make a plan, practice financial self-discipline, and explore your options to find sound financial vehicles. The biggest keys to look for in sound financial vehicles? The ability to provide safety (so you don’t lose the hard-earned principal you put in), liquidity (so you can access your money when you need to), rate of return (to get as high a rate as possible), and tax advantages (since taxes likely aren’t going anywhere but up in the future!).
As a financial strategist and Abundant Living Coach for more than 40 years, I’ve spent my entire career helping thousands of Americans identify those kinds of vehicles. There aren’t many that are able to provide all four key elements—but as our clients can attest it’s worth the search to find what will work best for you. None of our clients lost any principal due to market volatility during the economic upheavals of 2000 – 2010, and in fact many doubled or tripled their money.
Whether you’re among the 78 million approaching retirement over the next 15 years, or it’s a little farther in your future, don’t wait. Don’t assume the government will step in to rescue you. Create your own plan for financial security, and you’ll sail into your golden years with confidence.