How to Prepare for the End of Social Security

Social Security is the federal program that provides income for retirees, workers who need long-term disability and children under 18 if a working parent dies. Currently, retired Americans receive 100 percent of their promised benefits. Social Security Trustees predict that by 2042 the trust funds will run dry. The benefits would fall at that time by 75 percent. Here's how to prepare for the end of Social Security.

Instructions

1. Inventory your assets and liabilities to evaluate your finances. Keep track of your expenses. Write them down and include everything, being as detailed as possible.

2. Develop a savings plan. Pay yourself out of your paycheck as soon as you are paid. Consider an automatic transfer from checking into savings, or having your employer deduct savings from your paycheck. Consider putting your money into a savings account, mutual fund or certificate of deposit (CD).

3. Control and eliminate your debt. You should try to pay off your debt, including your mortgage before you retire. Stop spending and limit the use of credit cards. Live below your means.

4. Research the best retirement plans for you. A SEP-IRA is good for business owners and people with extra jobs. A SIMPLE IRA is for employers with employees. Contribute to one or more IRAs and Roth IRAs, annuities, trust accounts or group IRAs.

5. Start or readjust your investment portfolio. Think about investing automatically into your retirement plans or to your broker. After you have researched the many options available, then talk with a financial professional. Emphasize that you want enough money in your retirement portfolio to live on without Social Security.

6. Participate in your company's 401(k) or 403(b) plan. If your employer offers matching contributions, contribute at least the minimum needed to capture your employer's match.

7. Consider investing in real estate by developing a portfolio of rental units. Purchase properties with little money down and then rent out. When the mortgage is paid, then the cash received becomes income and you will receive a check each month as long as you keep the unit rented.

Tips & Warnings

• Check on your pension. Know if you have a defined contribution plan like a 401(k) or a defined benefit plan. With an IRA defined benefit plan, the employer pays a fixed amount to a retired employee.

• Consider laddering your CDs. This form of savings delivers both interest income and available cash as the CDs mature at different intervals.

• Ask around for good financial professionals. Then meet and interview them. Do your homework and ask questions. Keep in mind you are hiring them and they need to adequately answer your questions and impress you.

• Social Security does not provide all the money needed for retirement and it doesn't compete with the stock market or other investment vehicles.