Is Social Security Safe? How to Protect Yourself

I recently read an article from the Social Security trustees about the health of the social security system. Wow, quite depressing. The bottom line is that in 21 years (2033), benefits could be cut by 25 percent depending on their estimates. For someone who is self-employed and has to pay both sides of social security taxes (employer and employee), this is truly maddening that my benefits could be cut.

So what is a person suppose to do? 

Contribute the maximum to your retirement plan account – currently employees under age 50 can contribute $17,000 per year, and individuals age 50 and older have a catch-up provision allowing them to save an additional $5,500. The total contribution including employer match for 2012 is $50,000.

Just a little math:  $17,000 a year for 25 years with a 6 percent return will grow to $932,697 and this doesn’t even include a company match or getting a better return on your account. This is an easy way to offset future social security benefit cuts. I call this pay yourself first… 

Can’t afford to contribute the maximum into your retirement account? Start with what you can afford, and whenever you receive a raise, put the raise into your retirement account. After a few years, you will be contributing a large amount into your retirement account and you won’t miss that raise. 

Pay yourself first...