'Social Security is broke beyond belief': This Boston University economist warned the government safety net is full of holes — here's how to make sure you stay afloat in retirement
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Many Americans aren’t saving enough for retirement — and they’re relying on Social Security benefits to get by . But that may not be a sound strategy.
“Social Security is broke beyond belief,” Laurence Kotlikoff told The Brink, Boston University's research news website. “Its unfunded liability is $65.9 trillion — twice the size of official government debt.”
The "retirement planning evangelist" and professor of economics at Boston University says that paying for all projected benefits through time requires “an immediate and permanent hike” in the employer-employee The Federal Insurance Contributions Act (FICA) tax from 12.4% to 17%. Without the hike, Social Security payments are on track to be reduced as soon as 2034.
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Older Americans are already getting anxious. A new AARP survey shows 61% of Americans age 50 and over worry they won’t be able to financially sustain themselves during their retirement years.
Given these issues, it might be a good idea to reduce your dependence on Social Security and take charge of your own retirement — here are a few ways you can do that.
Secure your retirement fund
“Even after Social Security contributions, and after 401(k) contributions, they should probably be saving another 15% of their take-home pay, which is very tough,” Kotlikoff said. “Most people are saving nothing.”
According to the AARP survey, his statement rings true. About 20% of Americans age 50 and over do not have anything saved for retirement.
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Plan, invest, save for the future
Even if Social Security benefits are still paid out in full, many Americans face complicated hurdles in the system.
“For far too many of America’s seniors, with any but the simplest situations, negotiating the complexities and outright scams of the Social Security system on their own is nigh impossible,” Kotlikoff told The Brink. “Kafka could not have designed a more complex set of provisions with hidden catch-22s that can haunt you — in the form of clawbacks — decades after you start collecting benefits.”
The Brink article lists tips for retirement savings that include: plan within your means, save in addition to your retirement program, use planning tools, and wait longer to collect Social Security benefits.
If you want to invest and save in addition to your chosen retirement account and lessen your dependence on Social Security, you have multiple options.
Invest
Real estate is an intriguing option for retirees and can be especially appealing when compared to investing in the sometimes volatile stock market. This asset class has strong potential to generate long-term income that you can use during retirement or to add to your savings.
For example, Arrived makes it easy to fit rental properties into your investment portfolio without all the barriers and hassles that come with purchasing and managing a property yourself.
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Start by browsing a curated selection of homes, vetted for their appreciation and income potential.
Arrived’s flexible investment amounts and simplified process allow everyday investors to take advantage of this inflation-hedging asset class as part of their retirement plan.
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Save
Kotlikoff describes the economics-based approach as determining a sustainable living standard based on your resources, and adjusting your spending as circumstances change, so you don’t outlive your savings.
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Plan
Given that Social Security is, in Kotlikoff’s words, “broke beyond belief,” it’s worth exploring other options. It could be a good idea to consult a financial planner to determine which options are best for you.
If you’re unsure how to begin investing and create a long-term financial plan for your retirement, WiserAdvisor can assist you.
WiserAdvisor is an easy-to-use online platform that connects you with vetted financial advisors. After sharing some information about yourself and your finances, WiserAdvisor’s easy-to-use online platform matches you with two to three FINRA/SEC registered financial advisers best suited to help you develop a plan to achieve your retirement goals.
From there, you can view the advisors’ profiles, read past client reviews, and schedule a free consultation with no obligation to hire.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
