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Social Security, How to plan for the unknown?

Nobody wants to enter retirement unsure if they will be able to afford basic goods and services. With meaningful inflation for the first time in decades, current retirement saver's are contemplating the role of social security in their planning. According to a Nationwide Retirement Institute survey, only half of millenials, typically those between age 26 and 41, agreed with the statement, "I will not get a dime of Social Security benefits I have earned".

I do not share in my younger colleagues pessimism. Social Security will be there, it just will require some significant tweaks. Unless Congress acts in the next twelve years, benefits will be reduced by 23% with payroll taxes continuing to fund the remaining 77% of benefits. If no additional changes are made, that is projected to grow to 26% by 2095. That would be tragic for the roughly 25% of Americans who rely for over 90% of their retirement income from Social Security.

To address the shortfall there will likely have to be some combination of higher payroll taxes, lower benefits, higher retirement age, or means testing to receive benefits. Fortunately for those with retirement off in the distance, they have plenty of time to prepare. Savings vehicles at work such as 401K, 403b, 457b and IRA's will have to be aggressively funded by both employees and employers alike. Leaving money in the plan and not cashing out when switching jobs will become even more important. Not letting the temptation of borrowing from funds to pay for one's current lifestyle to the detriment of their older self will be imperative. With that in mind, save early, save often and save some more is the prescription for future retirement success.

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