Presentation on theme: "Save Now, or Pay Later by Burnett Sawyer. Your paycheck Imagine that youve finished school, gotten a job, worked hard all week, and this dollar bill represents."— Presentation transcript:
Save Now, or Pay Later by Burnett Sawyer
Your paycheck Imagine that youve finished school, gotten a job, worked hard all week, and this dollar bill represents your whole paycheck.
As your employer, Im about to hand you the check when I stop, tear off about 20% like this, give it to Uncle Sam and say, Heres my employees income tax. Minus income tax...
Minus Social Security... Then I tear off another 30% like this, give that to Uncle Sam too and say, And heres her Medicare and Social Security tax. What is Medicare? What is Social Security?
You get whats left... Finally, I give you this half and say, Here, hard worker, this is whats left of your whole paycheck.
Does that sound like science fiction? Senator Alan Simpson doesnt think so. In Modern Maturity magazine, he says that unless legislation changes the Social Security system, our generation will pay 20% of our paychecks as income tax, and 30% as Social Security tax. That means we can keep just 50% of what we earn!
But the news gets worse! Remember this 30% that we paid to Social Security? Well, that wont be enough money for retired people to live on in the year Remember that year, 2043well come back to that soon.
Whats the problem? The Social Security system cant ensure our savings for retirement.
Whats the solution? We have to start our own savings plans, and the earlier the better!
Social Security Timeline Ever since the Social Security system started in 1935, it has never been secure. 1935: Social Security starts
Social Security Timeline While the system has been fixed a number of times, these fix-it jobs havent solved the problem. For example, writer Keith Carlson points out that in 1983 Congress raised payroll taxes, extended the retirement age, and said that the system would be in good financial shape until : Social Security starts 1983: System is adjusted 2056: Social Security to end
Social Security Timeline But then, says Carlson, just nine years later, a report said that Congress had been wrong. It said that Social Security money wouldnt even last until 2056; it would run out by Remember that year, 2043? Thats six years before were supposed to retire at age 67! 1935: Social Security starts 1983: System is adjusted 1992: System is revised 2043: Social Security to end 2056: Social Security to end
1935: Social Security starts 1983: System is adjusted 1992: System is revised 2029: US bankrupted! 2043: Social Security to end 2056: Social Security to end Social Security Timeline Do you think that news is bad? The AARP Bulletin reported on the Bipartisan Commission on Entitlement and Tax Reform, which warned that entitlement programs such as Social Security are growing so fast they could bankrupt the country by the year 2029 when were only 47! What is the AARP?
So what should we do? Next fall we can vote in a presidential election for the first time. Both Democrats and Republicans say they have a plan that will use money from the budget surplus to fix Social Security. What if we all vote for the presidential candidate with the best plan? Will that save our retirement funds? Dont count on it! As the track record for Social Security shows, one more fix-it job wont fix the system.
We have to start our own retirement plans and do it early in our careers. In fact, in his book, Retirement 101, Willard Enteman says that we should start a personal savings plan the day we get our first paychecks. In sociology class last week, Mr. Christians made the same point. He gave us this bar graph showing that if our goal is to save $200,000 by age 67, we had better start early before saving gets too expensive.
A $200,000 Savings Plan As you can see from the graph, if we start saving when were 25, we can reach $200,000 by saving just $49 a month.
A $200,000 Savings Plan If we wait until were 35, well have to save $113 a month.
A $200,000 Savings Plan If we wait until were 45, well have to put away $279 a month.
A $200,000 Savings Plan And if we wait until were 55, well need $832 a month.
Look at the difference! To reach $200,000 by age 67 would cost $49 a month if we start at 25, and $832 a month if we start at 55.
Whats my point? The Social Security system cant promise us financial security when we retire in 2049.
Whats the solution? We have to start our own savings plans and the earlier we start, the easier it will be to reach our goals. So lets get started!
What is Medicare? Medicare is a program sponsored by the US government, to assist in providing health care for the elderly and the poor. Along with Medicaid (a related program), in 1965 it was made an amendment to the Social Security act. Go back.
What is Social Security? Social Security is a set of programs established by Congress to provide an income for individuals and families when other sources of income are unavailable. It is commonly used by retired persons to supplement a pension. Go back.
What is the AARP? AARP stands for the American Association of Retired Persons. It is a nonprofit organization devoted to the interests of middle-aged and elderly citizens in the US. Go back