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Dealing With Social Security’s Inherent Inability to Ensure Retirement

The more you look at Social Security, and the more you ponder its place in your retirement planning strategy, the more you become aware of the program’s basic premise. This premise, in simple terms, is to keep seniors from falling into poverty in their later years. Of course, the program has related objectives of providing supporting income during times of illness or injury, providing support for survivors, and ensuring the well-being of children of covered workers, and many other related purposes, but the common purpose understood my most is to provide for supplemental income after leaving the workforce. Note the keyword “supplemental,” since its original intent was to avoid the perils of poverty that could befall seniors in retirement if the cost of living exceeds their income.

So, meeting the cost of living is something built into Social Security’s current design, but history shows that this provision has not been effective in shielding seniors from the growth in living expenses they face. In fact, as The Motley Fool’s Maurie Backman explains in a post on their website, seniors today are dealing with a “40% loss of buying power since 2000” as a result of the program’s annual cost-of-living adjustment (COLA) not being able to keep up with the costs seniors face.

This COLA deficiency underscores the importance of future retirees preparing for their financial needs in retirement via self-funding approaches. She provides an example in her article, which you can read here.

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