When it comes to planning for retirement, your 401(k) and Individual Retirement Account (IRA) are both great tools to have in your toolbox. For real estate investors, I am particularly fond of the self-directed, or solo 401(k)—what the IRS calls a one-participant 401(k).
But you can’t forget your Social Security benefits as a key part of the solution. We all see the deductions on our pay stubs, but there’s quite a bit else about the program that many don’t know.
Signed into law by Franklin Delano Roosevelt in 1935, the Social Security Act was part of the sweeping New Deal social programs that stabilized the American economy during the Great Depression. The act established a trust fund that would be paid into by workers with each paycheck. Funds were to support those workers when they retired (and their survivors after they died). The program was expanded in 1965 to also include disability benefits.
Here are a few other things you should know about your Social Security benefits.
Social Security: Understanding the Benefits
The Pool of Money Is Enormous
As of April 2020, there is nearly $2.9 trillion in the fund. In fact, there is so much in the American Social Security trust fund that it eclipses the GDP of every single country in the world except China, Japan, Germany, and India.
That Money Supports Millions
While $2.9 trillion is a massive amount of money, a whopping $1 trillion of that was paid out in 2019 to 64 million beneficiaries. Luckily, there are at least 178 million workers paying into the trust fund each year to replenish the fund for the next generation of retirees.
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