Looking back it wasn’t all that long ago that we didn’t have this thing called retirement. At the beginning of the 19th century if you were the breadwinner for your family you worked until no longer able. This was either because you became too old or ill. Or you died. At this point you and/or those depending on you moved in with other family members for support or you lived in poverty. At this time there were also places called poor farms where people went who could no longer support themselves. This was the way of life until about 80 or 90 years ago.
During the Great Depression, Social Security was created. It paid the primary worker a retirement benefit when they reached the age of 65. At first the benefit was just a lump sum payment and then in 1940 recipients started getting monthly benefit checks.
Social Security was never meant to take the place of someone’s paycheck. Instead, it was meant to supplement whatever they had salted away so they could spend their final years in relative comfort. In time though many retirees came to look at Social Security as their main and, most of the time, only source of income. Looking back this probably wasn't a bad way to look at Social Security since at that time the quality of life for many people at the age of 65 was very low.
Now life at retirement is quite a different story. The quality of life has gotten much better and for most people the quality of life at retirement far better than their working life. Retirement is now when you can do all the things you couldn't do while you were working. That quality life comes with a price, and it's not cheap. You'll have to decide how you will pay for it.
Let's look at an average 65 year old planning to retire now and fund his retirement only with his monthly Social Security benefit check. Our person has a current annual salary of $40,000.00 and will be retiring in December when he reaches 65 1/2 years old.
Using the at the Social Security Administration web site we can quickly calculate a rough estimate of our retiree’s monthly benefit. After calculating our person will get $1101.00 per month. That doesn’t sound bad but keep in mind with his salary he was probably taking home 3 or 4 times that amount per month just before retiring.
Now let’s take a look at the expenses our retiree will probably have. Let’s assume that he has paid off the mortgage on his house and that he has no outstanding credit card debt.
Car payment.....................250.00
Power/Gas Utility.............100.00
Telephone...........................40.00
Insurance(home/auto) ...150.00
Cable/water.........................50.00
Food/Groceries................300.00
Gasoline..............................50.00
These are fictitious wages and expenses. Plug in your own figures to see how you might fair on just Social Security.
The total of these monthly expenses comes to $940.00 leaving our retiree with just $161.00 for anything else they might want to do during the month. But before this can be counted on as extra cash for the month our retiree needs to consider health insurance. While employed he most likely had hospitalization and other medical benefits through his employer. Now that he is retired he will need to sign up for Medicare and supplements depending on the coverage he wants. This coverage could run up to $200.00 per month or more.
You can see how hard it would be for Social Security alone to sustain someone through his or her retirement. With the expenses I have listed, including Medicare, a retiree could not survive on just Social Security. The expenses listed could be trimmed and by being very frugal someone could get by but retirement is your time to enjoy life. The expenses listed do not include any vacations, trips to visit children and grandchildren, or any frills outside of day to day living.
It is very important to start planning and saving for your retirement as soon as possible. If you read this and think you still have plenty of time for retirement planning you might want to consider the cost of things when you plan to retire. Nobody can predict the future but we can look at the past to get an idea of what the future may hold. Looking back 35 years a gallon of gasoline was less than 30 cents and you could buy a brand new Cadillac for $5400.00. That same gallon of gasoline is right around $3.00 today and a new Cadillac starts at over $32,000.00.
| 