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ave to be adjusted by to take into affect the inflation rate.

Let's look at a 22 year old who just graduated from College and is starting on their professional career. For simplicity we will assume that they start with a salary of $50,000 dollars a year and only increases with the inflation rate. We want to calculate how much this person will need to save monthly and their total lump sum to be able to support a lifestyle similar to the one lived while working. Using the assumptions we made, and the life expectancy table we can come up with an estimated answer. First of all this person would retire at the age of 67 years old and is expected to live until the age of 84. That gives us 17 years of expected retirement. Also we have to adjust the earnings to inflation which was estimated at 4.07%. We also have to assume that 75% of their previous income will provide them with a similar lifestyle to the one lived while working. Lastly we will have to assume that they would be able to get a 9% annual return on their retirement accounts.

When all of this is taken into consideration we arrive at $105 dollars a month, and a lump sum of $1,077,902 (Appendix B). This number is with Social Security Benefits. When we calculate the totals without Social Security Benefits we arrive at $242 a month, and a lump sum of $2,494,613 (Appendix G). It is very evident that Social Security has a huge factor in the amount that needs to be saved as it more than doubled without Social Security. Also these numbers were assuming that you began saving right when you entered the workforce at age 22. This is typically not the case as many wait awhile before taking their retirement income serious. Taking this into consideration lets apply the same scenario for this person but have them wait until they are at the age of 30 to start saving for retirement.

The starting salary adjusted for inflation would be $68,800 if we start at the base of $50,000 as we did with the previous example. The monthly contribution to maintain 75% of your income with Social Security would rise to $266 a month and a lump sum of $1,287,378 (Appendix H). The monthly contribution without Social Security to maintain 75% of you income would rise to $516 a month, and a lump sum of $2,494,693 (Appendix I). It is evident from this data that waiting until you are 30 years old causes major increases in the amount that needs to be put away each month.

There are some possible solutions to this Social Security issue. Some of these possible solutions include raising payroll taxes, lowering of the benefits, rising the retirement age or privatize part of the system and let individuals invest in stocks, bonds, and mutual funds in order to attain higher rates of return on their payroll taxes. Making any change to this system causes issues because there are so many people already receiving these benefits. All of these possible solutions would stir up other issues as well. Nobody wants to have their taxes raised, there benefits decreased, their retirement age increased. When it comes to privatizing Social Security it is a double edged sword, in the way that it puts risk in Social Security in seeking greater benefits. There is a possibility that there could be a negative return and make Social Security in a worse position than it already is.