I like the idea of equating Social Security to an inflation-adjusted income annuity and putting a price tag of up to $800,000 on it. Of course, for most people that income may not be enough to support their lifestyle in retirement. That’s why they need other annuitized income, like a pension or income annuity.
A key difference, of course, is that Social Security is not backed by an insurance company’s reserve/assets, but rather it’s based on Social Security taxes.
To preserve the level of benefits for future generations, I’ve made a few simple proposals, all starting with the analogy of treating Social Security as an income annuity.
The article points out the issues of being a helpful parent and funding some of an adult children’s expenses. While my wife and I are all for helping out our kids, and we’re doing some gifting now to them, we don’t do that at the expense and risk of our own retirement.
So how do you do both? One answer is to take some of your retirement savings and purchase “retirement insurance” — in other words, guaranteed income that starts during your second stage of retirement.
While you may temporarily disinherit the kids in the short term, in the long run, you’re helping them establish their independence and unburdening them from covering your late-in-retirement expenses.