Living with credit

Happy Birthday, Social Security

Emily Crone

On this day in 1935, the United States Social Security Act passed in Congress. This act created a government pension system for retired Americans. Well, it was a great idea at the time! It has served our grandparents well, and some of our parents, too. But those of us in my generation are sadly realizing that Social Security will likely be emptied out by the time we retire.

Social Security cardWe can raise a stink about the fact that we pay a Social Security tax but likely will never ourselves benefit from it, but it’s better to instead think about how we can plan ahead for this shortfall. We have to face the reality that our own 401(k)s and IRAs will likely have to be enough to carry us through the golden years.

Due to the magic of compounding interest, it greatly benefits you to begin saving as early as possible. You can end up with exponentially more money for retirement by starting in your early 20s rather than your early 30s simply due to the way interest is calculated. If you are fresh out of college, you are probably thrilled to have a salary of your own and can’t wait to spend it on everything you couldn’t afford as a student.

But do yourself a HUGE favor and begin contributing to your 401(k) right away. Even 5 percent of your salary will make a big difference in the long run. This money will be deducted before you even receive your paycheck, and it lowers the amount of income you pay taxes on, so that helps ease the blow.

It was painful for me to do this just out of school and on entry-level pay, but I am so glad I did. In my years since graduating, I have slowly bumped up my contribution percentage. It is still sometimes painful, especially when I have some credit card debt that needs to be paid off or a big purchase I want to make. It’s easy to look past it, though, when I realize that I don’t want to be working when I’m 80! Those of us who won’t necessarily benefit from Social Security have to get ourselves out of instant gratification mode now so we can be sure to actually enjoy our retirement later.


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