The social security trust fund is on track to being totally depleted by 2034!
That’s not to say the entire system is going bankrupt though… three-quarters of the program’s money comes from taxes, while the remainder is taken out of the trust itself.
Still, that means these benefits are subject to a 25% price cut within the next 15 years.
Eventually social security alone won’t be enough to cover your expenses during retirement and you’ll need another source of income to make up for it.
That’s why I’ve listed your best way to compensate for this hit.
So, how exactly do you prep for this 25% social security deduction that’s on the way?
You can start by setting up your own retirement savings account.
This is often easier said than done though. With so many ways-to-save out there it can be difficult to narrow things down and find a fund that’s right for you.
As a general rule of thumb, IRAs seem to be the go-to in terms of a one-size-fits-all way to financially prepare for your golden years.
Even then, you still have to decide between two options: Traditional or Roth.
Traditional IRAs don’t require you to pay taxes on the cash you deposit, but whatever you take out is taxed as ordinary income.
On the other hand, Roth IRAs let you make deposits that you’ve already paid taxes on, while withdrawals remain completely FEE-FREE!
This is usually the deciding factor for most people because the taxation that comes along with Traditional IRAs tends to eat away at your nest egg more than a Roth IRA.
If you’re in for the long-haul and want to make the most out of your investments, then Roth IRAs are the way to go.
To make matters even more appealing, a new tax law is in the works that could raise Required Minimum Distributions (RMD) of these IRAs from age 70 to 72.
Right now, it’s mandatory for plan participants to begin withdrawing savings from their retirement accounts once they’ve reached 70 years old.
But if this new law is passed, then retirees will be able to accumulate assets for another 2 whole years!
If building your retirement savings tax-free wasn’t enough already, then maybe this RMD extension for Roth IRAs will be enough to win you over now.
A lot can happen to your savings in that timeframe and it’s just another reason why this type of IRA seems to be your best bet.
Don’t take on the whole “ignorance is bliss” mindset when it comes to social security falling apart.
This 25% drop in benefits will be here before you know it and you’ll want to be as prepared as possible with a retirement account of your choice on the side.
Feel free to check out whatever other savings programs you have at your disposal, just know that Roth IRAs are a well-rounded way to get yourself ready for retirement.