When planning ahead for retirement, it seems that Social Security has become more of a source of worry than comfort. A poll of 1,005 people conducted in March by ABC News/Washington Post revealed that 81% of people polled believe that the Social Security system is heading for a crisis if changes are not made.
Starting your retirement savings early is the best way to be prepared for retirement, and also means you wonâ€™t financially depend entirely on Social Security.
A little understood fact about Social Security is that it was never intended to cover all of your retirement needs. It is intended to supplement your other savings and perhaps a company or union pension or your self-employment retirement program.
Every year, you should receive a statement from the U.S. Social Security Administration containing information about the amounts you have paid into the fund (through the previous year) and an approximate amount you can expect to receive in retirement.
The first step is to decide if you will be able to live on that amount when you are retired. Keep in mind that your health may not be as good as it is today and that medicine and doctor’s appointments may eat up a good portion of that benefit. If your projected Social Security income isn’t enough to meet your needs, you will have to supplement it with other retirement savings.
If you work for an employer, find out if they offer retirement programs such as a 401(k) or a 403(b) and how much of your contributions your employer matches. To get answers, talk to someone in the company’s human resources department or in the benefits office. Keep in mind that if your companyâ€™s retirement plan is exclusively invested in company stock, you probably want to look for ways to diversify.
It is also another wise idea to start an Individual Retirement Account (IRA). If you are a taxpayer, you may contribute earnings to an IRA up to a maximum amount each year. Each IRA has different rules, but they all allow your money to grow either tax-deferred or tax free.
The NFCC has many financial calculators to help you as you start planning for retirement. If you have any questions about Social Security, visit the Social Security Administrationâ€™s website at http://www.ssa.gov/.