There have been warnings from the Congressional Budget Office (CBO) that social security could become insolvent. If no action is taken by congress, the CBO estimates that there could be a reduction in benefits for retirees.
In an effort to find a potential solution to this problem, the CBO recently released their suggested policy changes that may help to keep the program funded. Some of these policies include:
- Reduced benefits for high income earners.
- Adopt a flat benefit for new beneficiaries.
- Raise retirement age gradually to 70.
- Raise or expand Payroll Taxes.
Even if these policies are adopted, it is likely to be harder to retire since retirees will need to rely more on their savings while potentially facing higher inflation and insufficient social security benefits without proper cost of living adjustment.
When you stop working, you will need to rely on your retirement plans, pensions, entitlements, and other savings you may have for the rest of your life. Today that could be between 20 years or longer if you retire at 65 years old. Most seniors will likely end up working longer, delaying retirement as long as possible.
If you want to have control over your future and retire the way you want to, have a plan that will give you the best chance of reaching your goals.
To create a plan, you need to know how much you need to sustain your standard of living adjusted for inflation over your life expectancy. Then you can determine how much you need to save to cover the gap between how much you already have saved and how much you need. Then you can assume a rate of return on your investments in a diversified portfolio adjusted to your risk tolerance over time. Finally, you will have the estimated amount you need to save to retire and have enough money to last the rest of your life.
You may also consider working with a professional who can help you build and maintain your financial plan. Additionally, an advisor can help you to be financially motivated, reducing your anxiety and giving you confidence in your future.
