Justify Social Security ... Don't Save for Retirement

It is a common question when investors review their retirement plan—should we include social security benefits into our retirement income projections?

It seems the closer an investor is to retirement, the more likely he/she will include social security benefits into the analysis. Younger investors, however, may feel compelled to omit such benefits. They must then become mavericks on the retirement front. The choice is yours, but before you decide the influence of social security on your future, remember the following points:

When Franklin D. Roosevelt signed the social security act in 1935, he stated that social security gives some protection to American families. One reoccurring theme of his statement focused on assistance, not 100% protection. In the President’s words, “the law will flatten out the peaks and valleys of deflation and of inflation (source: http://www.ssa.gov).”

For many, the Social Security Administration has raised the age of full retirement from 65 to adopt a more stringent schedule. This may be an addition of a couple of months or a couple of years. The administration justifies the increases due to longer life expectancies and general healthier life styles.

For example, those born after 1960, your full retirement age is 67. Going forward, we should ask ourselves “what other changes will be made to social security?” If you would like a complete schedule of retirement ages for full benefits, I recommend you visit Social Security's website at http://www.ssa.gov.

An opinion adopted by many is to consider social security in part the closer you are to retirement. For example, if you are sixty years of age and plan on full retirement in five years, you should consider an analysis based on your current projected benefits. Even with the proposed reform plans, preservation of benefits is a priority for eligible citizens age 50-55 and older.

If however you are thirty, it may be better for you to omit such projections. The result will be overfunded personal savings. Thus social security will be an added benefit and not the benefit.

Consider the troubling issues of the 2004 OASDI Trustees Report: future scheduled benefits for today's young workers could be reduced by 27% or more if amendments to the current plan are not adopted.

Young workers should take note of this report. Do not rely on social security and concentrate on personal savings.

In conclusion, you have a risky option—there is only one way to justify social security, don't save for retirement. If this is your chosen route, be prepared for difficult times ahead.

After years of terrorizing the countryside, hunting deer, poaching livestock, killing game, Tiger grew long in the tooth. Finally, he knew it was time to retire. So he packed his bag and ambled into town to the Three Little Pigs Retirement Home Inc. He rang the bell, and the first little pig appeared on the landing above. "What do you want?" asked the little pig.

"I come here to retire," Tiger replied.

"Ooooh. I don't think so," the little pig declared. "You're not like us. You've got big teeth. Very dangerous. We can't let you in."

So Tiger went to the dentist and had his teeth removed. The next day, he returned to the Three Little Pigs Retirement Home Inc. "What do you want?" asked the second little pig.

"I have no more teeth. I come here to retire," Tiger replied once more.

"Ooooh. No, no, no. That just won't do," the little pig exclaimed. "You're different. You have sharp claws. You scare us. We can't let you in."

So Tiger went to the manicurist and had his claws removed. The next day, he returned to the Three Little Pigs Retirement Home Inc. "What do you want?" demanded the third little pig.

"I have no more claws. I come here to retire," Tiger repeated.

"Ooooh. Let me see," the little pig muttered as he disappeared from sight. Tiger heard much whispering and commotion behind the big wooden doors. "Okay, come in," said the little pig.

Tiger strolled through the doors, and there stood the three little pigs, grinning ear to ear. Suddenly they jumped on Tiger. Squealing with delight, they beat him up and sent him packing. No teeth. No claws. Yippeeee! Finally they got even with Tiger for terrorizing the animals.

Tiger should have known better. He should have accepted who he is and not try to conform to someone else's image of him. What tiger in his right mind lets a pig paint his portrait?

So, who paints your portrait?