As our nation struggles with timely issues such as the war in Iraq, homeland security and immigration, another serious issue is creeping up on us — the cost of supporting an aging America. According to figures cited by Kiplinger’s magazine, 19 percent of the U.S. population will be older than age 65 by 2030, compared with less than 12 percent today. While it currently takes payroll taxes from five working Americans to finance the Social Security and Medicare benefits of one retiree, by then each retiree will be supported by only three workers.
According to the Federal Reserve Board, the tax burden for future working generations could be as high as 33 percent if nothing is done to change senior benefits. Kiplinger’s predicts these “painful” choices for funding future retiree benefits: much higher taxes; flat or declining government spending on everything, from defense and scientific research to education and housing; slower growth of spending on senior entitlement programs; much higher national debt; or a combination of these.
While those in Washington D.C. discuss possible across-the-board solutions to this long-term national issue, all Americans should be making their own preparations for this potential crisis. The first step? Boost our national savings rate.
Currently, American families are saving less than ever. The Commerce Department recently released figures that showed the national savings rate last year fell to its lowest level since 1933 — to a negative 1 percent.
According to Money magazine’s list of 25 rules to grow rich by, “If you’re not saving 10 percent of your salary, you aren’t saving enough.” Unfortunately, many people aren’t saving anything. No matter what your age, start saving something now. Pay yourself first and do it regularly. Take advantage of employer matching contributions if you’re eligible for a 401(k) plan or devise a plan of your own. TFCU is always available to discuss with our members options to save and reduce debt.