No Need For Social Security

Question of the week:I'm starting to seriously save for retirement and am looking at all my different options. I'm wondering about Social Security--do you think it's reasonable for me to plan on it for any part of my retirement income? Dear Gen Y, We recently asked members of the Armchair Millionaire community about the role that Social Security plays in their retirement plans, and got a range of responses: It will be essential. "My retirement is made up of bond funds, stock funds, annuities and Social Security. I look at these as the four legs on my retirement stool. --Joe G. It won't be there at all. "I plan on zero Social security benefits. At 26, we are already maxing out our Roth IRAs and 401(k) plans, so we will be fine when we retire." --Trevor It will just be it gravy. "I am not counting on Social Security for any of my retirement. If I get anything, I will consider it a bonus." --Michael H. Even the Social Security Administration says that your Social Security benefit should be only one of three parts to your retirement savings formula, along with a pension and personal savings. For the growing number of us not covered by a company pension, that leaves just Social Security and savings. And if you're skeptical of ever receiving any significant Social Security benefit, you should plan on taking care of all of your retirement yourself. But this really isn't bad news. With the myriad options of retirement savings vehicles now available, funding retirement all on your own is within easy reach. My checklist has the steps to get you started. The Armchair Millionaire's Checklist for an Abundant Retirement Make a plan. Start with a clear understanding of exactly how much you'll need, when you'll need it, how much you'll need to save, and how to invest it all. You may find the services of a financial advisor especially useful when planning your retirement savings program and assessing your future needs. Defer your taxes. The best deal Uncle Sam has going is retirement savings tax-deferral. Simply put, when you use a retirement account like a 401(k) or IRA you can often deduct your contribution and you won't have to pay taxes on the growth of that money until you withdraw it. (In the case of the Roth IRA, your contribution is not tax-deductible, but your money will grow tax-free forever.) Deferring your taxes in this way can add hundreds of thousands of dollars to your nest egg by the time you retire. Don't look a gift horse in the mouth. Every type of retirement account has some kind of limit on the amount you're allowed to contribute each year. Do yourself a favor: Contribute the maximum allowed, or at least as much as you possibly can. Capture compounding returns. Over time, the thing that will make up the lion's share of your retirement savings will not be what you've contributed, but the returns (and the returns on your returns) on your contribution. So whenever you invest for the long term, make sure that you have all your interest and dividends automatically reinvested. THE BOTTOM LINE: Stashing away the entire amount that you'll need for the golden years seems like a daunting task, but it's one you can easily whittle down to size. By starting immediately and saving regularly into retirement accounts, the fate of Social Security will become something you just don't need to worry about.