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Pension and Social Securities Trends

A recent research of the EBRI (the Employee Benefit Research Institute) has shown that with the increase of the age of the people, they become more reliant on social securities. The study has compared the levels of income from 1987 until 2004.

This reliance on social securities can be alleviated by the fact that over the years the incomes have increased. For example, in the beginning of the period under consideration people (those between the ages of 65 and 69) were making on average $13, 600, whereas in 2004 the incomes have increased to approximately $28,000. This represents a 24% increase under the consideration of the inflation rate estimated by the CPI (consumer price index).

Unfortunately, compared to total income as a percentage of it, annuity and pension income has remained one and the same. Some groups as people above the age of 80 have experienced a positive change in their pension and annuity incomes. But this should be disregarded to a certain extent since in 1987 these people were at the ages of 65 to 69. Nonetheless, this group of people enjoyed the highest percentages of annuity and pension incomes.

Another negative trend that has been observed is the fact that the source of income has changed, leading to less money coming from assets such as mutual funds, bonds, stocks and etc. This leads to the conclusion that people are either relying more on pensions and social securities or that they are working more. The latter is proven by the sad statistics that more and more people instead of enjoying their retirement years continue to work in order to provide for a comfortable existence.

What is more disturbing is the tendency that leads to the extinction of both social security and pensions use by the new generation of employees. On the other hand, people from the old generations increasingly become dependent on social securities and pensions, experiencing even higher levels of reliance than it was back in1987.

As a result, 401 (k) plan and IRA investing has increased their significance with regards to the young generation of workers. This is caused by the gradual disappearance of pensions and social securities as a source of income during retirement years. So, carefully consider your retirement plan in advance so that you can ensure financially secure retirement years. The earlier you do this, the greater your chances for success.

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