Don’t let the legs fall of that 3 legged stool!
When it comes to a great deal of the world today, retirement may appear as though it is a good way off. The majority of people end up with an impression in which issues will likely work themselves out. The stark reality is that you need start taking care of oneself and your wife and kids, as absolutely no one besides you will do it for you.
Now we have recently been disciplined to assume that many of us will probably be safe and secure due to the three-legged stool of retirement planning. The three legs being Social Security, pension, and 401k’s. We must have an understanding of the dangers of depending on the three legs to support us during our retirement.
Practically every single person realizes the fact that social security is actually the difficulty. The foundations of social security are that generally there will invariably be a continuous supply of workers to maintain the welfare checks of an aging workforce who are about to retire and the disabled.
The issue is that the social security funds are being spent quicker than the can be topped up, so it will be unable to keep up with the growing number of people leaving the workforce and collecting welfare checks compared to the number of workers contributing to it.
By the year 2042, the entire system would be exhausted and bankrupt
President George W. Bush said not so long ago that by the year 2042, the entire system would be exhausted and bankrupt, now that’s a very sobering thought.
Retirement plans have not necessarily lived up to their expectations. Many state and local governments, such as California, Colorado, Massachusetts, New York and Vermont to name a few are feeling the crunch from lack of fund in public pensions. It is estimated that as of 2003 some of the largest state and city pension funds were $367 BILLION short of meeting their required funding.
The most significant issues with 401k’s tend to be that they are certainly not sufficiently liquid. When an unexpected emergency occurs, generally there tend to be significant penalty charges for premature withdrawal. An additional downside is that often you find that many people actually spend their 401k money far too quickly once they retire. Not considering that if they completely use up their 401k before the end of their lives, they would be left with only Social Security and whatever savings they may have accrued over time.
Far be it for me to say that a 401k is not a good thing, it can as long as it is part of a wider financial plan. You will need to ensure you maintain proper discipline in managing it and try not to put all your eggs in one basket.