The Long Game Becoming Government Independent


I have been reading for the last ten years that by 2035, the Social Security program will have to go through potential massive reduction in payout to stay solvent. This is an excerpt from the Social Security Administration:

The concepts of solvency, sustainability, and budget impact are common in discussions of Social Security, but are not well understood. Currently, the Social Security Board of Trustees projects program cost to rise by 2035 so that taxes will be enough to pay for only 75 percent of scheduled benefits. This increase in cost results from population aging, not because we are living longer, but because birth rates dropped from three to two children per woman.

Importantly, this shortfall is basically stable after 2035; adjustments to taxes or benefits that offset the effects of the lower birth rate may restore solvency for the Social Security program on a sustainable basis for the foreseeable future. Finally, as Treasury debt securities (trust fund assets) are redeemed in the future, they will just be replaced with public debt. If trust fund assets are exhausted without reform, benefits will necessarily be lowered with no effect on budget deficits.

I believe that Americans, especially younger Americans, need to consider that they may be responsible for their future personal care – without social security. Employers have eliminated costly pension plans to try to meet quarterly earnings expectations, and many are no longer matching 401k contributions.

So, where does this leave us? We need to make sure we are proactive and understand what our futures will look like without the government. The tools we have vary by situation, but if you are employed, you may be able to put money away on a tax deferred basis through a 401k. Contributions are pre-tax and allow for tax-deferred growth until you use it. If you are lucky enough to work for an employer that matches, this may be a great route to go for your long-term savings. If you do not have access to a 401k, you may want to set up a Traditional IRA or a Roth IRA, depending on your current income situation and expected income during retirement. Setting up either of these plans will be better than not having any plan at all.

Lastly, you should consider setting up a systematic savings schedule – get used to paying yourself first and consistently putting away money into this account. Here in America, we tend to live by what we have available in our bank account. The key to long-term saving is to get that money out of your account before you realize it’s there. “Pay yourself first,” as Oprah would say, is going to be essential in becoming less dependent on the government in the future.

Every individual situation is different, but we all can spend less than what we make. When you do that, it creates opportunity to save. Even if it is as little as $10 a week, we all must start somewhere. Remember, the chances are very likely that there will be some type of reduction in Social Security in the future, and we need to start taking care of ourselves now.
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