Save Now, or Pay Later

1
Save Now, or Pay Later

• by Burnett Sawyer

2
Your paycheck

• Imagine that youve finished school, gotten a
  job, worked hard all week, and this dollar bill
  represents your whole paycheck.

3
Minus income tax . . .

• As your employer, Im about to hand you the
  check when I stop, tear off about 20 like this,
  give it to Uncle Sam and say, Heres my
  employees income tax.

4
Minus Social Security . . .

• Then I tear off another 30 like this, give
  that to Uncle Sam too and say, And heres her
  Medicare and Social Security tax.
• What is Medicare? What is Social Security?

5
You get whats left . . .

• Finally, I give you this half and say, Here,
  hard worker, this is whats left of your whole
  paycheck.

6
Does that sound like science fiction?

• Senator Alan Simpson doesnt think so. In Modern
  Maturity magazine, he says that unless
  legislation changes the Social Security system,
  our generation will pay 20 of our paychecks as
  income tax, and 30 as Social Security tax. That
  means we can keep just 50 of what we earn!

7
But the news gets worse!

• Remember this 30 that we paid to Social
  Security? Well, that wont be enough money for
  retired people to live on in the year 2043.
  Remember that year, 2043well come back to that
  soon.

8
Whats the problem?

• The Social Security system cant ensure our
  savings for retirement.

9
Whats the solution?

• We have to start our own savings plans, and
  the earlier the better!

10
Social Security Timeline
Ever since the Social Security system started in
1935, it has never been secure.
1935 Social Security starts
11
Social Security Timeline
While the system has been fixed a number of
times, these fix-it jobs havent solved the
problem. For example, writer Keith Carlson
points out that in 1983 Congress raised payroll
taxes, extended the retirement age, and said that
the system would be in good financial shape until
2056.
1935 Social Security starts 1983 System is
adjusted 2056 Social Security to end
12
Social Security Timeline
But then, says Carlson, just nine years later, a
report said that Congress had been wrong. It
said that Social Security money wouldnt even
last until 2056 it would run out by 2043.
Remember that year, 2043? Thats six years
before were supposed to retire at age 67!
1935 Social Security starts 1983 System is
adjusted 1992 System is revised 2043 Social
Security to end 2056 Social Security to end
13
Social Security Timeline
Do you think that news is bad? The AARP
Bulletin reported on the Bipartisan Commission on
Entitlement and Tax Reform, which warned that
entitlement programs such as Social Security are
growing so fast they could bankrupt the country
by the year 2029when were only 47!
1935 Social Security starts 1983 System is
adjusted 1992 System is revised 2029 US
bankrupted! 2043 Social Security to end 2056
Social Security to end
What is the AARP?
14
So what should we do?

• Next fall we can vote in a presidential election
  for the first time. Both Democrats and
  Republicans say they have a plan that will use
  money from the budget surplus to fix Social
  Security. What if we all vote for the
  presidential candidate with the best plan? Will
  that save our retirement funds?
• Dont count on it! As the track record for
  Social Security shows, one more fix-it job wont
  fix the system.

15
We have to start our own retirement plans . . .

• . . . and do it early in our careers. In fact, in
  his book, Retirement 101, Willard Enteman says
  that we should start a personal savings plan the
  day we get our first paychecks.
• In sociology class last week, Mr. Christians made
  the same point. He gave us this bar graph showing
  that if our goal is to save 200,000 by age 67,
  we had better start early before saving gets too
  expensive.

16
A 200,000 Savings Plan
As you can see from the graph, if we start
saving when were 25, we can reach 200,000 by
saving just 49 a month.
17
A 200,000 Savings Plan
If we wait until were 35, well have to save
113 a month.
18
A 200,000 Savings Plan
If we wait until were 45, well have to put
away 279 a month.
19
A 200,000 Savings Plan
And if we wait until were 55, well need 832 a
month.
20
Look at the difference!
To reach 200,000 by age 67 would cost 49 a
month if we start at 25, and 832 a month if we
start at 55.
21
Whats my point?

• The Social Security system cant promise us
  financial security when we retire in 2049.  

22
Whats the solution?

• We have to start our own savings plans . . .
• . . . and the earlier we start, the easier it
  will be to reach our goals.
• So lets get started! 

23
What is Medicare?

• Medicare is a program sponsored by the US
  government, to assist in providing health care
  for the elderly and the poor.
• Along with Medicaid (a related program), in 1965
  it was made an amendment to the Social Security
  act.
• Go back.

24
What is Social Security?

• Social Security is a set of programs established
  by Congress to provide an income for individuals
  and families when other sources of income are
  unavailable. It is commonly used by retired
  persons to supplement a pension.
• Go back.

25
What is the AARP?

• AARP stands for the American Association of
  Retired Persons. It is a nonprofit organization
  devoted to the interests of middle-aged and
  elderly citizens in the US.
• Go back