One of the vehicles that many people believe will be there to assist them with their retirement is Social Security. But Social Security is not something you want to depend on for your future. Why? There are several reasons and we'll attempt to outline some of them here.

Consider this statement: "Social Security simply provides a basic benefit for almost every worker. It serves to bridge the gap between sheer destitution and having life's bare necessities." In other words, Social Security is not designed to maintain the type of lifestyle you currently enjoy - it will provide you only with the very basics.
To get a true picture of what this means, it's important for you to find out what you will be entitled to under Social Security when you retire. This benefit is called your "personal insurance amount" or PIA. The amount of PIA changes with the age you choose to retire. Most Americans think that they'll start getting Social Security at age 65 but that's not always the case. If you're born in 1960 or after that date, for example, the normal retirement date, according to Social Security, is 67 years old, not age 65. You can retire as early as age 62, but you will receive a reduced percentage of your personal insurance amount for life.

If you'd like to find out how much is due you and your spouse, you can stop by any Social Security office or you can call (800) 772-1213. Ask for the Request for Earnings and Benefits Estimate Statement or form SSA-7004. Within 4 to 6 weeks of filing this form, you will get a statement that shows you all the wages you have paid Social Security taxes on and an estimate of the monthly benefit you'll get once you're eligible. It's a good idea to request this information every three years or so in order to be sure Social Security has an accurate account.

Once you know what your PIA will be, you may think, "Well, I can work to supplement that amount and improve the quality of my life." The only problem with that is not only will your efforts be taxed by the government, but your Social Security benefit will be reduced as well. Currently, you're allowed to earn up to $8,000 a year but if you make more than that, the amount of your Social Security received will decrease, eroding any benefit you get by working.

How secure is Social Security anyway? Changes in demographics are affecting retirement planning. When Social Security was established in 1935, retirees might expect to live another 10 or 12 years after retirement. Today, people can expect to live 20 to 25 years beyond retirement, stretching their fixed incomes over more years and at higher costs than anticipated. In 1945, there were 42 workers contributing to Social Security for every retiree receiving it. By 2020, as the number of retired seniors grows and the number of people working shrinks, there may be just two workers per retiree supporting the system.

As people are living longer, it presents more and more of a burden on Social Security. By the year 2030, the number of people age 65 and over will virtually double and those 85 and over will triple. By 2020, an estimated 53 million retirees will get Federal benefits, up from 32 million in 1991. Combined with the fact that Congress has trouble keeping its hands off the Social Security fund, there may be real problems. By the time many of us are in the position to retire, it will be interesting to see if Social Security, even in the form of merely providing bare necessities, will be in existence at all.

Amazingly, only one out of five Americans will not require Social Security. Be the one out of the five who doesn't and start saving for your future today.

Where Should You Invest Your Money?
By Barry Habib

Where should you invest your money? Although people feel that investing dollars in a bank account may be a safe investment, it really isn't. True, there's no risk as far as loss of principal is concerned. However, the effects of inflation will more than likely eat away any profits that you earn by saving money in a bank account. Most times, interest earned on money in a bank account, although safe, will merely offset inflation, therefore providing you with no real gain. So where can you invest dollars safely and still achieve good, long-term returns?

Throughout the past 50 years, stocks have provided the best overall return of all the traditional investment vehicles offered in the United States. Many people feel uncomfortable investing in stocks due to their lack of market awareness or inexperience in investing. Or they may feel that the stock market can be very risky. To some extent, that's true. However, if your goal is long-term investments meaning a time horizon of 5 years or greater, equities or stocks by far and away have been the best performing investments. And as time increases, the risk diminishes.
Investing in stocks is a pretty broad term. People may have heard stories of huge losses and in short periods of time, even with big name companies such as IBM. My advice is not to invest in any single stock, but take a look at some mutual funds.

A mutual fund is a pool of investors, folks just like us, giving their money to a professional management company. These professional money managers have huge research departments as well as years of experience. They handle the investment decisions to meet the fund's objective. These companies are quite reputable and most have been in existence for several decades. A mutual fund has to have diversification. It can't have more than 5% of it's assets in a single stock. Therefore, each mutual fund has to have at least 20 different stocks. But what usually happens is that each mutual fund has closer to a hundred or two hundred, maybe even five hundred different stocks. Now that gives you a tremendous amount of diversity. It means that if one stock gets crushed, from either economic factors within that company, or within the industry, then you're not going to have a devastating loss. By the same token, if a stock announces that it's been acquired, which could cause the price of that stock to jump dramatically in value, with a mutual fund, you will surely show a small benefit, but it will not give you the dramatic benefit that you would receive if you had been totally invested in that one stock.

But our game plan here is not to gamble. We don't want to take on too much risk. We don't want to try and either hit a home run or strike out. We want to have gradual, long-term planning with relatively solid results. Now unlike a bank account, mutual funds are not guaranteed by the FDIC (Federal Depositors Insurance Corporation). However, stocks diversified over several different companies greatly reduces risk. If your time horizon is five years or greater, you should attempt to invest in as aggressive a stock growth fund as possible. Because although that's going to be more volatile, over time, it will prove to have dramatically higher returns and it has always been the best performing investment over time.

Now if you're planning to save for a home and need to have equity preserved over the next year or two so you can use it for a down payment on your home, this is not the investment for you because your objective is not long term savings in that case. When you're saving for a home, you're much better off with a very conservative type of fund or even putting your dollars in a bank account. But if your goal is long-term savings - five years or more - you should be involved with as aggressive an equity growth mutual fund as possible.

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