Being Socially Secure

It seems like social security is on everyone's mind right now. There are problems that need to be fixed about and the actions taking place are concerning to others. 

It is a complicated issue, one that I certainly do not have answers too, but I have a few ideas. It we keep Social Security as it is  now, most of the funds would most likely be exhausted in 2037 from baby-boomers and others who have used it up. For people- like me- I would not be able to benefit from it after spending years contributing to it. Not very fair, not very secure. One idea is to make it more personal- almost like individual savings accounts- to at least be able to recover some of what we have contributed ourselves and not have to rely on the nation to support us- which would be wonderful, but not very likely. But I think it would offer peace of mind to those who are hopeful to use these funds during retirement.

Another idea would be to increase the amount of earnings that is subject to tax and perhaps removing the cap that is placed on $106,800 altogether. These higher earners should be taxed for the full amount they earn even if they will not receive those benefits back. I think they can afford it and can also afford to have a very comfortable retirement plan already in place unlike other lower income workers. I know, I know. Is taxing the rich really a fair plan?? As someone who has made less than $50,000 their whole lives, I would hope they would understand they can afford it more than we do. No one needs $1,000 purses or $200,000 cars. My ford works very well.

  

The fact of the matter is that something needs to be done with helping social security stay afloat or help revamp the system all together. . I am always pleased when politicians bring up the idea and show more attention to it but I’m not naive enough to think that they are doing it to receive votes and perhaps votes alone. Case in point- our current president. These" promises" he gave us about not increasing taxes for he middle class and rescuing small-businesses-- were just mirages.

Traditional IRA's and ROTH IRA's

So you are thinking about retirement planning. What the heck are these IRA's you keep hearing about? And who is Roth? IRA's are Individual Retirement Accounts. They are a form of retirement planning that offer tax saving advantages.

With Traditional IRA's, you do not pay taxes on any contributions you make to the account. And the contributions you make may be tax deductible (and may lower your current tax depending on your income). When it comes time to withdraw the money from your Traditional IRA account, you will need to pay taxes on those distributions.

With Roth IRA's, you do pay taxes on any contributions to the account and contributions are never tax deductible. But later, any money withdrawn is tax free (since the taxes have already been paid) and the distributions are not included in your income. BUT- watch out! If you withdraw before you turn 59 ½ (I know- seems like a random age, but it is important!) you may have to pay an additional 10% penalty tax. (But as always, there are exceptions to this rule- FYI exceptions are pretty common in the finance world.)

To help you remember:
Traditional IRA- Pay after --"It's a tradition to be free first and pay later"
Roth- Pay before --"Face the 'Roth' of the taxes first and enjoy the freedom later"

Oh and "Roth" is named after Senator William V Roth Jr who introduced Roth IRA's as part of the Taxpayer Relief Act of 1997. So he is a pretty cool guy. And he represented Delaware, which is also...uh...cool?