Yes, We Need To Fix It

Alicia Munnell was recently interviewed in Barron's. I enjoy reading her commentary and interviews even if I disagree with her approach to things. 

She favors increasing the payroll tax to make up the potential shortfall in Social Security that could be coming in 2034 or 2035. By her reckoning, a 3.5% increase is needed. There was no mention on whether that should be applied to everyone or one idea floating out there that it goes up to the current threshold, at $147,000 this year, and then start up again starting at $250,000. There is no fix where people won't complain. Some group won't like it, everyone agrees something needs to be done, but what? 

Munnell has long believed in working until 70 to max out Social Security benefits, she also cited the benefits of  being socially engaged and challenged by working. I agree the social engagement and being challenged are vital to successful aging whether that comes from not retiring or something else. She did concede that not everyone can work that long due to health reasons.

Her suggestion for the "average person" is to have 10 times their earnings in retirement savings. That wasn't explored as to where that comes from. I think rules of thumb like that are nonsense. What are your expenses? What else do you want to be capable of covering (like unplannable one-off expenses)? How much will you get from Social Security? How much then needs to come from your portfolio assuming a 4% withdrawal rate? Do the numbers work? If not, what can you do?

At least 50% of people are not prepared for retirement. Again, if you are not going to have enough, what can you do? If you're not sure, time to start figuring something out.

It was pointed that she was worried 15 years ago that Baby Boomers would not have enough for retirement. She was asked how that worked out, she said just like she thought, they don't have enough so people are doing what they have to, they are scrimping. I've been making a similar point for ages. Regardless of whatever number you thought you needed back when you were 30 or 40, whatever you wind up with is your reality and you need to figure out how to make it work.

She said "we need to fix Social Security and we can do that." To the title of this post, don't wait for them, the government, to figure it out and fix it. We are just statistics, it is up to us to figure out, prevent or solve our own problems. No one will care more about our retirements or other outcomes more than ourselves.