#229: 3 Things You Need to Know About Retirement (Friday, May 20)

So recently I had a conversation with a friend who didn't realize that Social Security was in trouble and might not be around by the time we get to retirement. I was completely shocked by this, since I write about these statistics every day and just assumed everyone knew. Then I had a similar conversation with another friend and realized that many people are in the know, so here are five things you need to know about retirement:

• Last week the Trustees of the Social Security Fund released their 2011 Annual Report. The report shows a projected deficit of $46 million for 2011, and that the Social Security reserves will be exhausted in 2036, a year earlier than previous projections. This means that unless Congress comes up with a plan to fund Social Security (which, given the current budget problems, is a bleak prospect), tax income would only be sufficient to pay 3/4 of scheduled benefits through 2085.
• Given current medical enhancements, people are living longer than any generations before them. This means that you could spend 30 years or more in retirement. Since the reserves expire in 25 years and the tax income will last only another 49 years, those of us in our 30s or younger, need to start saving our own money for retirement.
• The average monthly SS benefit is $1,077...not nearly enough to cover expenses such as mortgage/rent, food, healthcare costs, etc.

This isn't to scare you, but it is to make sure you know you have to be proactive and start making a plan now. Assume you will not get full SS benefits and that you'll spend 30+ years in retirement. Assume you'll need a monthly income (comparable to what you use now) to live on in those 30 years.

Start today by taking one small step: Maximize your contributions to your 401(k) or other retirement account--especially if you are lucky enough to have a company match. It's money you're leaving on the table.