Who Can You Count on For Retirement?

by Jason on August 17, 2009

Remember the good old days when you worked for one company all your life and were rewarded for your loyalty with a nice pension and health benefits to help sustain you in your later years?  Add Social Security into the mix and it made for a pretty nice retirement.

Those days are over.  There are a few companies still providing these benefits to employees, but only to the ones who have been grandfathered in.  Most large corporations and pretty much all smaller ones are doing everything they can to shift the burden of retirement to the employee.

Thanks for Your Hard Work, But..

Photo by: navarzo2

Look at GM for example.  When you are losing approximately $4,100 per vehicle sold it’s no wonder you can’t compete with Toyota or Honda.  A big reason for this was due to high labor costs and large pension obligations.  In the restructuring of GM, one of the major issues they were looking at was the release of those pension obligations so they could reorganize, become lean and try to become a viable car company again.

I know someone personally who worked at a large steel company for 30 years, retired with a nice pension and health benefits only to have the company file for bankruptcy, slash his pension and dump his health insurance several years later.  What a way to say “Thanks for all your years of hard work!”  I’m surprised they didn’t ask for the watch back they gave him on his 30 year anniversary.

I’ll Just Live on Social Security

Photo by: Dumbeast

Social Security was signed into law in August 14, 1935 by President Roosevelt as a response to the Great Depression and a desire to provide “economic security” to a broad number of people.  According to Wikipedia, “In 2004 the U.S. Social Security system paid out almost $500 billion in benefits.   By dollars paid, the U.S. Social Security program is the largest government program in the world and the single greatest expenditure in the federal budget, with 20.8% for social security, compared to 20.5% for discretionary defense and 20.1% for Medicare/Medicaid.”

What began as a program to provide help to those underfunded for retirement has turned out to be one of the largest social assistance programs ever created.  The problem lies in the fact that we have fewer people paying into the system than are taking from it thus creating a deficit.  In fact, in early May, the Associated Press reported this about Social Security and Medicare:

The financial health of Social Security and Medicare, the government’s two biggest benefit programs, worsened in the past year because of the severe recession.Trustees of the two programs said Tuesday that Social Security will start paying out more in benefits than it collects in taxes in 2016, one year sooner than projected last year, and the giant trust fund will be depleted by 2037, four years sooner.

Yikes!  I don’t know about you, but this doesn’t bolster any confidence in the program and certainly makes me think about other ways to fund my retirement.

Retirement: It’s Up To You!

Photo by: Rocketeer

The bottom line in all of this is the fact that when it comes to your dreams, desires and goals, retirement is up to you.  We obviously cannot rely on others to make our goals happen, we need to step up and start getting our finances in order so that we can fund our own retirement.

What steps can you take to start getting your retirement and financial house in order?  The best place to start is figuring out how much you need in retirement.  Once you have an idea of what it will take to support yourself, you can work your way backwards to figure out how much you need to be saving.

To get an idea of how much you can save for retirement you should probably develop a budget  and look for expenses you can cut back on.  Use that “found money” to help save into a retirement account like a Roth IRA.

By being frugal, simplifying your lifestyle, saving aggressively and choosing your investments wisely, you can help get on track for your retirement goals so that when Social Security stops sending you checks or your company no longer provides you with a pension you can still manage to get by on your own.  After all, you have to count on yourself to get your retirement funded properly.

What About You?

Have you had experience with companies forgoing their pension obligations?  Are you confident that Social Security will be a piece of the pie for your retirement?  What steps have you taken to get your retirement funded properly?

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