Many articles have been written about the impending insolvency of the Social Security. In fact, more money is already going out in benefits than coming in via payroll revenue - a shortfall of $68 billion in 2016 that will burgeon to trust fund exhaustion by 2034 without any legislative action.
The reality is that 23% of American families 65 or older rely on Social Security for 90% of their income. In Iowa, the average is 24% with an average benefit payout of $1,314 per month (U.S. average: $1,308 per month). That is already a critical amount of families who rely on a system with a growing shortfall of billions. The portion of middle income Baby Boomers who expect to rely on Social Security as their primary income source has risen from 30% in 2007 to 38% today.
Retirement savings, 401(k)s, and pensions are most helpful if contributed to early and often, thanks to compounding interest. However, for many individuals, that advice may come too late. The average American age 55 to 64 had accrued just $104,000 in retirement savings in 2015.
Because of this, more and more retirees are choosing to participate in the gig economy - whether that is driving for Uber, renting their house via Airbnb, or offering their services on pet related apps like “Wag!” for dog walking or Rover for pet sitting, etc. One third of future retirees expect to have employment income, up 7 percentage points from last year. Among those still working, 45% expect to work full-time longer than they had originally planned, and 43% expect to work in retirement.
In Iowa, the labor force participation rate for those age 65 and older was 18.6%, a total of 93,063 individuals. This number may grow in the coming decades as Social Security benefits shrink, unless individuals (particularly those in younger generations) make saving for retirement a priority - early and often.
If you are planning for retirement, please contact 515-557-1860 or firstname.lastname@example.org to inquire about our financial planning services. We look forward to hearing from you.