By James A. Gage

While many Americans realize that Social Security won’t provide them with enough income to get by, most people might not realize just how inadequate Social Security checks are. According to the Social Security Administration the average Social Security check today is for under $720.00 a month, which equals approximately 50% of the averages retiree’s budget. The other percentages amount to this, 23% is attributed to ongoing employment, and the final 27% represents Personal Savings /Investments.

In a study, Standard & Poors’ illustrated how Social Security benefits differ among individuals who were at various earnings levels before they quit working. Let’s look at some examples. Let’s say that John , Mary and Skip all retire at the age of 65 in 2001. In their last full working year, John earned 20,000, Mary earned 40,000, and Skip earned 57,600. During their first retirement year, John received 8,988 from Social Security, which represents almost 45% 0f what he earned during his last year of work.

Mary, on the other hand, received 12,768 from Social Security, or 32 percent of the amount she earned in her last year before retirement. Skip collected 13,336 from Social Security, or just 23.5 percent of the amount she earned in his last year of work.

As you can see, the percentage of final year income that Social Security replaces declines for those who had higher income levels.

Another threat for many Americans is the possibility that the Social Security system will become insolvent. The engine that drives the system is powered by working citizens, who pay premiums into the system. These premiums are used to a great extent to pay Benefits to retires. If a situation were to develop in which more people were receiving benefits than were working and paying premiums, the system would face a crisis. That danger, or something approaching it, seems possible with the huge baby boomer Population moving toward retirement.

According to the Social Security Administration 3.4 workers currently are working and paying into the system for each retire who is collecting benefits. But in a recent report, the Social Security Administration predicted that by the year 2035, there will only be 1.9 people working for each retiree.

What does this all mean to you? First off, don’t count on Social Security as your sole source of income for retirement. Save as much as you can during your working years. To save, I suggest that you first maximize your investments in tax- deferred accounts. These may include 401k’s, IRAs ,SEP and 403b’s. Finally, contribute to your investment accounts regularly. While many people might find it difficult to make large lump-sum contributions to their investment accounts, a savings program that includes small systematic contributions certainly can help you build up a nest egg for retirement. Even in tough markets, as we are experiencing now investing is a must, the vehicle you choose should align with your risk tolerance.

That being said, no matter where you find yourself financially you must have a Formula for success. Now is the time to take control of your financial future, you must decide are you a Employee or a Employer. You will never have financial freedom working for someone else and history proves that over and over again. When studies are done on financially successful people one thing comes up time and time again- they all are involved in Real Estate, have their own business and practice leverage investing!

For more information or pricing please do not hesitate to call or e-mail. I can be reached at (508) 595-9567.