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Social Security: Here Today, Gone Tomorrow?
By: Deborah A. Cary, Financial Professional
MONY Life Insurance Company, New York, NY (MONY)
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Social Security is the major source of income for today's beneficiaries. Just 2 in 10 retirees find that their personal savings are their most important source of income. In contrast, half of today's current workers expect personal savings to be their most important source of income in retirement. According to the 1999 Retirement Confidence Survey, 38% of Americans are not very or not at all confident that they will have enough money to cover medical expenses after retirement. The Social Security Administration also cites in a recent national poll that 3-in-4 workers "worry that they won't have enough money to live comfortably in retirement." Only about one out of every two workers attempts to figure out how much they need to save before they retire.
Although Social Security currently makes up a large part of retirement income, most people who will retire in the next century do not think they'll get Social Security benefits. These contradictory facts point out the vast need for tomorrow's retirees to plan for retirement more aggressively, and very differently than their parents did. For people to have adequate retirement income in 10, 15, 25 or 35 years - when they are ready to retire - a long-term and diversified retirement funding strategy may be needed.
What does this mean for today's workers?
Three key issues:
1. A pension may not be enough. A complete approach to retirement funding - considering Social Security, employer pensions, and personal/family funding - may be necessary.
2. The next generation of retirees is likely to rely more on personal programs than any other generation of retirees. This is especially true considering that life expectancy is longer than ever before (more than 75 years, according to EBRI) and retirement age had become earlier, relative to previous generations.
3. Workers need to take a diversified approach to building their retirement funds. Mutual funds, stocks, bonds, life insurance, annuities, and other financial funding vehicles are all available to help meet the needs of tomorrow's retirees. (Diversification among types of assets is generally recommended to help reduce investment risk.) But what retirement funding requires most is the old-fashioned discipline of putting aside money on a regular basis.
Before making any decisions regarding your retirement, however, you should consult with your own attorney and financial professional to determine how these issues apply to your own circumstances and what, if any, retirement funding strategies are appropriate for you.
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