The people impacted the most are those who are closest to retirement because they have little time to save more money before reaching their retirement years. People in their 20s and 30s have the best opportunity to prepare and not need to depend on Social Security benefits alone to get by after they retire.
Congress can act on the predicted shortfall, but no one knows if it will. Some action plans have been submitted to deal with the issue, but so far, none have made it to the floor.
Because of the shortage, people in the workforce need to start making preparations and put more money into various retirement plans, investments, and savings accounts. Ideally, you do not want to depend on a single source of income but have several active ones to ensure a more comfortable retirement.
1. Employers Retirement Accounts
One of the best ways to save money for retirement is to take advantage of your employer’s retirement accounts—if they offer them. It is even better if they provide matching funds. If they do, max out the amount they are willing to match because it is free money and can help build your account faster.Before you choose a retirement plan from your employer, consider the options. If they offer an individual retirement account (IRA) or 401(k), you can get a tax deduction for your contributions to the account. Taxes are paid when the money is withdrawn in retirement, which will reduce the size of your checks. A 401(k) will let people under 50 contribute much more ($23,000) than you can with an IRA ($7,000). Those 50 or older have higher contribution limits: 401(k)—$30,500, and an IRA—$7,500.
Going for a Roth IRA or Roth 401(k) can give you two advantages. While you will pay taxes on your contributions, there are no taxes on withdrawals during retirement on that money and interest. The other benefit is that you do not need to start withdrawing the money when you turn 73 (no required minimum distributions).
2. Investments
Putting money into various investments is another way to save more money for retirement. Finance.Yahoo advises exercising caution when investing in riskier portfolios, and your risk level should be considered. The older you are, the less time you have to make up any losses. Generally, a rule to follow is if you cannot afford to lose the money, do not put it into high-risk investments.3. Get a Health Savings Account
If you and your family have good health, you can invest in a health savings account (HSA). You will need a high-deductible health plan first ($1,600 minimum deductible for an individual and $3,200 for a family), which will help you save money on premiums. Money put into an HSA is tax-deductible and builds interest tax-free, and money used for medical purposes is also penalty-free and tax-free.4. High-Interest Savings Accounts
Putting your money into a regular savings account will not earn money very fast. Fortune says that the average savings account in America only earns 0.37 percent. A high-interest savings account can earn between 4 percent or more. Online banks offer this kind of account. There will often be a minimum deposit, and you will likely be limited on withdrawals.5. Wait Longer to Claim Social Security
Instead of claiming Social Security at 62 or 67, wait a couple more years until you are eligible for the maximum amount—which occurs when you reach 70. Every year you wait after 62, you get another 8 percent added to your benefits. Waiting longer gives you and your spouse a much larger benefit.The sooner you start saving to meet the Social Security benefit shortfall, the better off you will be. The more time you let your money multiply in retirement plans and other accounts, the more you will have when it comes time to retire.
