Courtesy of ABC-TV
(Courtesy of ABC-TV)
Quick Read
According to Shark Tank investor Kevin O’Leary, Social Security was never designed to be a sole source of income.
According to CBS News, Social Security’s trust fund could run out a year earlier than expected, according to a new projection from the Congressional Budget Office (CBO).
Don’t depend on the government to help out. Build your own retirement through saving with 401(k)s and other investments.
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If you think Social Security will be enough to live on in retirement, have a Plan B.
According to Shark Tank investor Kevin O’Leary, Social Security was never designed to be a sole source of income. In fact, with average monthly benefits of about $1,900, it’s truly not sufficient to live on. Plus, we have to consider that the Social Security lifeline may be a lot shorter than you think. In fact, you may want to have a Plan B for that, too.
READ: The analyst who called NVIDIA in 2010 just named his top 10 AI stocks
Social Security May Run Out Sooner Than Expected
According to CBS News, Social Security’s trust fund could run out a year earlier than expected, according to a new projection from the Congressional Budget Office (CBO).
“The CBO forecasts that the Old-Age and Survivors Insurance Trust Fund — one of the two funds Social Security taps to disburse benefits — will be exhausted in 2032. The agency, which provides budgetary analysis to Congress, estimated last year that the trust fund would run dry in 2033,” reports CBS News.
Part of the reason for the issue is the CBO’s forecast of higher inflation, which could affect Social Security’s cost-of-living adjustment (COLA). That’s in addition to reduced individual income taxes and payroll taxes. So, you may want to have a Plan B, which means you want to build wealth on your own while lowering what you expect the government to do.
So, what does Mr. Wonderful suggest?
First, take some personal responsibility.
Don’t depend on the government to help out. Build your own retirement through saving with 401(k)s and other investments.
Remember to max out your contributions to retirement accounts if you can. Accounts with tax advantages – 401(k)s, IRAs, health savings accounts, etc. – are great ways to save and invest for the future. Also, if your employer offers a match program, contribute enough to receive the highest employer match possible. You can also max out your health savings account if you have one. Let’s say your employer will match up to 6% of your salary; maximize that.
Two, if you have limited savings, cut your expenses and cut out luxuries.
“Radically cut down on all your expenses. Lose the car. Lose the cable. Maybe even lose the cat. You’re in an emergency,” O’Leary said, as quoted by The Street. “You have to look at every expenditure with a critical eye and make tough decisions about cash flow. Five to seven years before retirement is the time to practice living frugally. Get used to deprivation before you’re deprived. You’re trying on what it feels like to live within your new means.”
“If you waste money on coffee, it’s like ‘peeing $1 million down the drain,’” once said finance coach Suze Orman.
Right now, the average cup of coffee can cost about $7. If you get coffee once or twice a week, it’s not too bad. But if you’re doing it every day – which many of us do- it’s costing you $210 a month, and $2,520 a year.
Instead, according to Suze Orman, “$100 a month in a Roth IRA, over 40 years, is $1 million. So, you need to think about it as you are peeing $1 million down the drain after you are drinking that coffee. If you just simply used your money to purchase needs versus wants, you would find the money to invest in your retirement account.”
Three, address healthcare costs.
Kevin O’Leary also says folks should plan for higher healthcare costs.
In fact, as noted by SharkTankBlog.com, “Health care alone can take a serious bite. A recent estimate from Fidelity Investments puts the expected medical costs for a 65-year-old-retiree at well over $170,000 across retirement. And that’s before factoring in everyday living. Add rising prices for basics like food, utilities, and services, and the math shifts quickly. The takeaway is simple. Planning for retirement means planning for higher costs than you expect. Having an extra cushion isn’t being cautious anymore. It’s being realistic.”
The reality is this: Social Security was never meant to carry you across the finish line alone. With rising inflation, solvency issues, and growing healthcare costs, relying solely on government benefits is no longer just risky — it’s just not realistic.
But you do have control of what happens next with your money. Every dollar you save, every unnecessary expense you cut, and every smart contribution you make to a retirement account moves you closer to financial independence. Also, a Plan B just makes sense at this point. Remember to take responsibility, cut ridiculous expenses, and make sure you’re prepared for healthcare and other potential costs.
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