Should you factor in Social Security payments as part of your retirement plan if you’re in your 30s or 40s? Well, I don’t consider it as part of my retirement planning. If you exclude it from your planning, it will push you to be a more aggressive saver. I would rather make that sacrifice now than be blindsided as I get close to retiring.The one certainty about the Social Security program is that it will continue to evolve. Whether that’s for the better or not is not certain. For instance, the Social Security Administration published a bulletin in 2010 titled “The Future Financial Status of the Social Security Program” stating “the Social Security Board of Trustees projects program cost to rise by 2035; so that, taxes will be enough to pay for only 75 percent of scheduled benefits.” According to the Social Security Administrationif Congress reduces benefits by about 13 percent or increases the payroll tax to around 14 percent, or both, future retirees will see full benefits for another 75 years.
Politicians aren’t known for taking action without voters prodding them. And young people aren’t typically the ones who have the time to make their voice heard. That spells delay. And according to a Forbes article (see “Will Social Security Be There For Your Retirement?”), benefit cuts in Social Security will likely be felt by young people and the rich.
So Social Security, in some form, may be there for the 30-somethings of the world. But why bank on it? Instead, start saving more now. How much? If you start saving when you’re 35 and want to retire by, say, 67, shoot for saving at least 18 percent of your pay. This 18 percent also includes anything your employer might put into your retirement account as a matching contribution. If you feel the number is unattainable, then delay your retirement until age 70. If you are doing your own financial planning, there are many retirement calculators on the internet to help you. And there are retirement-planning resources such as the Center for Retirement Research at Boston College. Or you can always consult with a professional financial adviser who you trust (see my next blog post titled “How do you pay your financial adviser?” to find an adviser who fits your approach).
Regardless of when you plan to retire, the saving should begin in earnest today.
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