Retirement Isn’t Guaranteed, Early Preparation Might Help.
Retirement is supposed to be the dawn of one’s golden age. You are expected to live your best life once you leave the workforce since you can pursue the interests you didn’t have time for in the past. However, having time to pursue your interests doesn’t always mean that you’ll have the funding to do so. Forbes reports that 66%, or two-thirds of Americans, have either no savings at all or not enough to generate significant income after they retire. A common misconception is that Social Security will be able to support you long into your retirement, and these days especially, that’s not true.
Social Security is the government’s flagship financial benefits program that uses tax dollars to support retirees, people with disabilities, and surviving family members of deceased workers. Eligibility for benefits is based on strict requirements, and the amount of benefits you can receive depends heavily on your work history. For people with disabilities, high unemployment and underemployment impact their ability to meet the criteria for retirement, which means that they may have to rely on disability benefits for the long term.
Without a robust workforce, social security is unsustainable because the program needs workers to pay taxes to support it. Because the U.S. aging population is growing faster than the birthrate, the number of people needing social security benefits will be higher than the number of people paying taxes for the program. The Social Security Administration reports that federal reserves for the program are expected to run out in the next 17 years. While Social Security will still be available, the payout for beneficiaries could decrease significantly, so relying on benefits, in the long run, is ill-advised.
Given these circumstances, it is important to start thinking about other ways to ensure your financial security, and CSD Learns believes that you’re never too young to start! In the latest edition of their Financial Education webinar series, Michael Kane, professor of business at the National Technical Institute of the Deaf at RIT, joined Joseph Santini to discuss how parents and educators could talk to their students about preparing for retirement.
Watch the recording, or keep reading, below to see what was covered!
Financial Education begins at home – the earlier you start, the better
Students learn a lot by observing their home life. Seeing members of their family or friends enjoy retirement can help them envision what their retirement might look like. They may make financial decisions similar to their parents and friends. Having conversations with your students about personal responsibility when it comes to money could help them learn the skills they will need to plan for retirement.
Financial education courses are a must
Not every student comes from a home where open communication around finances is possible, due either to the language barrier or cultural norms. Schools should offer financial education classes so students can familiarize themselves with the terminology and practice skills. Currently, only 16.9% of high school students are required to take a financial literacy course before graduation, which means roughly 80% of new adults go into the world unprepared.
Seeing is believing
Retirement is the culmination of a lifetime of saving. Students are more inclined to spend or share their money, especially when out with a group of friends. Students may not be thinking of saving because they do not see an immediate need to do so, especially if they are fully supported financially. Educators must teach students that saving money now can lead to long term growth, specifically when savings are placed in accounts with a high return on investment such as banks, pension plans, and social security to enhance growth over time. Visual representation showing how much money they can build over a lifetime may encourage them to consider putting aside money now. The best part is that there’s an app for that.
Hands-on experience helps
A part-time job not only gives students access to an income, but it also allows them to practice financial management. Most students have the unique advantage of having zero debt or expenses, so money saved in these instances can grow quite quickly. If students continue to save or invest a portion of their savings into an independent retirement account (IRA), they could be prepared to retire comfortably well before they hit 66 – which is the federal retirement age.
Reliance on social security could become problematic
Families with deaf students may be familiar with social security as their child may be a beneficiary of the program due to their disability. As mentioned previously, there could be significant decreases in the amount of support if there are fewer tax contributions to fund the program or if you don’t meet the eligibility criteria which is subject to change. This problem affects not just retirees, but also those receiving SSI or SSDI, which has seen payout decreases before. Reliance on social security as one’s primary source of income is problematic, whether you are a young deaf student or a retiree. Start investing in a savings account for your deaf student or teach them how to start saving so that they can maintain financial stability no matter where they are in life.
If you are looking for more tips and tools, click here to watch the entire webinar. March is National Credit Education Month, and the next webinar series will cover credit and debt. Be sure to sign up to tune in on March 18th. For more information, go to csdlearns.org/events.
For more resources on retirement, check out the additional links below:
- Social Security Administration Benefits Planner
- Top 10 Ways to Prepare for Retirement by the Department of Labor
- Top 10 Questions About Social Security
- When Should I Retire? The Pros and Cons for Each Age
- There are three main types of early retirement, and the only difference is how much you spend
- Why Save for Retirement?
- 3 Income Sources that Earn You Social Security Credits (and 2 that Don’t)