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Yahoo
26-04-2025
- Business
- Yahoo
Why Dave Ramsey Thinks Social Security Is a ‘Mess' — And What You Can Do About It
With Social Security facing serious challenges, Dave Ramsey is sounding the alarm. In a recent blog post on Ramsey Solutions, the personal finance expert didn't hold back, calling the system a 'mess' and urging Americans to take their retirement planning into their own hands. With growing uncertainty around the program's long-term stability, many are left wondering what role Social Security will realistically play in their future. Be Aware: Find Out: Here's why Ramsey believes Social Security is falling short and what experts say you can do to stay ahead. Social Security was never meant to fully fund retirement. It was designed as a supplement, not a safety net you can live off entirely. But according to a survey conducted by The Senior Citizens League, 27% of seniors have only Social Security benefits as income. The Social Security Trustees Report projects that the combined Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds to be depleted in 2035. If nothing changes, this could result in a 17% benefit cut in 2035. Ramsey pointed to this looming shortfall as just one sign that the system is in trouble. He argued that the imbalance between the number of workers paying into the system and the number of retirees drawing from it is unsustainable. With people living longer and fewer workers supporting more retirees, the math doesn't add up. Read Next: Given these challenges, Ramsey advises individuals to take personal responsibility for their financial futures. He recommends building retirement savings through consistent investing and not relying solely on Social Security. Robert R. Johnson, Ph.D., CFA, CAIA, professor of finance at Heider College of Business at Creighton University, doesn't agree with everything Ramsey recommends, but agrees on the importance of building retirement savings. 'Planning so that Social Security benefits can be considered the 'dessert' of your retirement spending is very prudent,' Johnson said. 'One certainly wants to err on the side of accumulating more wealth than less when it comes to your retirement nest egg.' To avoid over-relying on Social Security, here are some strategies to consider. 'The earlier you start saving for retirement, the more time your money has to grow through compound interest,' said Jake Falcon, founder and CEO at Falcon Wealth Advisors. He suggested contributing regularly to tax-advantaged retirement accounts, such as 401(k) plans, IRAs or Roth IRAs, as well as a health savings account (HSA), which can be used for medical expenses. Take advantage of employer matching contributions to your retirement plan. 'This is essentially free money that can significantly boost your savings,' Falcon explained. 'I can't stress this enough: If your employer offers a benefit this lucrative, you almost can't afford not to take it.' A diversified investment portfolio can help you better manage risk and provide more stable returns over time. 'Consider a mix of stocks, bonds, real estate and other assets to mitigate risk,' Falcon explained. 'Most importantly, you want to make sure your investments are lined up with your financial plan.' Consider adding additional sources of income, such as rental properties, dividends from investments or part-time work in retirement. 'Many retirees are still earning some sort of wage. It can be a great to stay active, as well,' Falcon added. Healthcare costs can be a significant expense in retirement. 'Consider what your plan for long-term care is and leverage health savings accounts to cover potential medical costs,' Falcon said. 'Life circumstances and financial markets change, so it's important to review your retirement plan regularly and make adjustments as needed,' Falcon explained. 'I would not make adjustments based on market fluctuations — instead, adjust your plan when your life changes.' More From GOBankingRates 6 Used Luxury SUVs That Are a Good Investment for Retirees 7 Tax Loopholes the Rich Use To Pay Less and Build More Wealth 7 Overpriced Grocery Items Frugal People Should Quit Buying in 2025 How Much Money Is Needed To Be Considered Middle Class in Every State? This article originally appeared on Why Dave Ramsey Thinks Social Security Is a 'Mess' — And What You Can Do About It
Miami Herald
22-03-2025
- Business
- Miami Herald
Scott Galloway has blunt 6-word response to Social Security fight
Many working Americans preparing for retirement (regardless of their age) have questions about saving and investing for the future, Social Security, and the federal program's future viability. Author and podcaster Todd Galloway starkly addresses one Social Security policy detail with a brief statement explaining his controversial opinion. Don't miss the move: SIGN UP for TheStreet's FREE Daily newsletter One question people often have about Social Security involves whether its benefits are enough to solely rely upon during retirement. The consensus among retirement experts is that the answer is no; other savings and investment vehicles need to be planned for during one's working years. Related: Scott Galloway warns Americans on Social Security, retirement money The most common retirement savings tools Americans use to free them from future dependence on Social Security monthly paychecks are employer-sponsored 401(k)s and tax-advantaged IRAs (Individual Retirement Accounts). Many wonder which of these is most effective for retirement savings. The answer is that both, used in combination, is a smart approach. Because a 401(k) usually involves an employer match up to a certain percentage of an employee's income, one good recommendation is to take the match up to its maximum, and invest the rest in an IRA. Roth IRAs are often recommended, because taxes are paid up front, which allows for withdrawals in retirement to be made tax-free. Another concern people have about Social Security is whether it will be around when they retire. Without legislative action, it is reported that its Old-Age and Survivors Insurance (OASI) Trust Fund will run out of money in 2033. At that time, continuing Social Security income would only be sufficient to pay recipients 79 percent of their expected benefits. Galloway, however, has a strong opinion about another policy issue regarding how Social Security is funded. Galloway explained a blunt opinion of his on a different fight he would choose about how Americans should pay for Social Security. "I mean, the Social Security tax," Galloway said in a statement he posted to Instagram. "Let's say you're making $150,000 a year. You pay $9,000 a year or approximately 6% in Social Security taxes. If I make $1.5 million a year, I pay - wait for it - $9,000 a year. Social Security tax tops out at 160K." Galloway then boiled his opinion about the Social Security tax down to a very brief statement. "That makes it a regressive tax," he said. Generally speaking, a regressive tax is one that is more of a burden on lower-income people, because the amount of the tax applies uniformly, regardless of one's income level. More on personal finance: Tony Robbins has blunt words on IRAs, 401(k)s and a tax factScott Galloway warns U.S. workers on Social Security, retirement flawDave Ramsey explains a Roth IRA, 401(k) blunt truth "So this just reflects what has happened across every industry and that is income inequality within the industry," Galloway continued. "CEO compensation is out of control. I don't know if there's anything you can do about it." "What you can do is at least have them pay their fair share of taxes." Related: Scott Galloway has 6-word response to mortgage, rent, home crisis In the past, Galloway has expressed an opinion that he believes, as someone who makes $16 million per hear, he should not be eligible to collect Social Security. "They call it a Social Security tax," he said. "There are a lot of taxes I pay where I don't register the benefits. It's not called the Social Security Pension Fund." Galloway explained that, over time, most people who collect Social Security end up taking out two or three times the amount of money they pay into it via the Social Security tax. This, Galloway said, is an argument for means-testing. The thinking is that Social Security monthly benefits mean a lot more to a person for whom it is a larger percentage of their overall retirement income than to a person for whom it is only a small percentage. That being the case, Galloway believes that for people at a certain income level, Social Security paychecks are simply not necessary. Related: Veteran fund manager unveils eye-popping S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
