Every day we hear estimates about how much longer before Social Security runs out of money. Especially during elections. With the population living longer and more people collecting, it’s putting Social Security in a predicament.
According to a study by the Government Accountability Office, Social Security will start to run out of money by 2036. Oh, that’s about the time I turn 69! Great, so I won’t be able to count on Social Security that I paid into my whole life.
Now that I know that there’s a chance that Social Security won’t be there for me, I’ll need to start planning for the worst. The worst case scenario that is. So what can you and I do to have enough income for retirement?
Here are 5 potential alternatives to Social Security:
1. Save More. You’re probably thinking, “Did he really say that?” Yep, we’ll just have to save a bit more. Hit that 401(k) hard with savings. Max it out if possible. Use Roth IRAs if you qualify based on your income. Remember, we may not be able to count on Social Security, so save like it won’t be there. Keep in mind Social Security is just part of your retirement savings, not the whole enchilada.
2. Save More Wisely. Not only do we have to save more, but we need to be smart about the way we are growing our wealth. Keeping fees low on our investments is a great start. Expenses can add up over time. Also look for investments that have good performance. Don’t chase performance, but constantly evaluate your investments and see if you can do better and maintain a risk level you are comfortable with.
3. Live Somewhere Cheap. There have been tons of articles written about the most affordable places to live. Smaller towns are always on the list. If you live in a major urban area, it might make sense to retire just outside of a major city. Some of these areas got pounded by the housing market like Las Vegas, and you might be able to purchase a distressed piece of property on the cheap.
4. Spend Less. Everyone can find some areas to cut in their weekly budget. Look for areas to save money, like brown bag lunches, car-pooling, shorter vacations or even buying used. Cutting down on expenses that you really don’t need, like recurring subscriptions. All of this will add up, allowing you to put more money into savings.
5. Work Longer. I know, I don’t even want to hear this one myself. However, it could be a viable solution. If you were planning on retiring at 65, perhaps postponing it until 67 or 68 could make a difference. Have your financial planner run an analysis to find out if this could work, and how much additional funds to save if necessary.
The Bottom Line
I think some form of Social Security benefits will be available for most of us. Just probably not in its current form. It never hurts to be prepared for a worst case scenario like no Social Security at all. If you have more than enough retirement savings, Social Security will just be the icing on top. If you would like to receive my personal finance and investment articles every week, click here to subscribe.