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How Social Security is Impacted by Poor Economy

About Debt

Americans from every walk of life have been affected by the recent recession. Wealthy individuals have seen their stock holdings wither away, middle-class families have seen the values of their homes erode, and rich and poor alike have seen job losses. While the able-bodied can begin their job searches as soon as they hear of an imminent layoff, the disabled and elderly who rely on social security are also being impacted by the economy. The economy is not growing; it is expected that there will be no cost of living increases in 2009, and perhaps not in the next few years either. With higher unemployment, and lower pay and fewer hours for those that are working, Social Security might become insolvent sooner than expected. Others that have been contemplating retirement have decided to work longer. If you are approaching retirement, it is more important than ever to make sure your financial house is in order first. If you have a lot of credit cards, debt consolidation can help you pay off your credit cards more quickly and help you prepare for retirement.

The Cost of Living Allowance

The Cost of Living Allowance, or COLA, has been given to Social Security recipients since 1975, when congress decided to allow an automatic adjustment to paychecks based on the Consumer Price Index (CPI). The CPI is based on the rate of change in the prices of several different products. It doesn't factor in taxes, or the value of stocks and real estate. The cost of living has been flat for the last year, which means that retirees are unlikely to see an increase in their monthly checks. Although they might not see an increase in their checks, many have seen an increase in their medical costs, and in their credit card payments. If you are nearing retirement, you don't want to get into a situation where your COLA is not increasing, but your credit card payments are. Debt consolidation can help you get out of credit card debt before you retire, so COLAs do not impact you as much.

Delaying Retirement

If the economy has wiped out your investments, you may want to consider delaying retirement. Social Security does not pay that much, and with no COLA, at least for the foreseeable future, it doesn't pay for a very extravagant lifestyle. If you continue working, you can wait out the poorly performing stock market, and pick up some more mutual fund shares at bargain prices. Now is a good time to get out of debt too. A debt consolidation loan will help you pay off your credit card debt while you wait for your stocks to regain their value.

Social Security, Debt in Retirement

The recent economic conditions have made Social Security less attractive, and less reliable. If retirement is years away, there is no guarantee that you'll ever see a return for all those Social Security taxes that you've paid over the years. Social Security is expected to start running a deficit in 2016, meaning that it will be paying out more than it is receiving in taxes. There is supposedly a Social Security "trust fund," but there is no money in it because the government has been stuffing it with IOUs. Even that is supposed to go bankrupt in 2037. To fix Social Security, the government will have to raise the minimum age again, reduce benefits, or raise taxes. If there are several years to go before you retire, you might want to count on Social Security. By getting out of debt now, you can start building up your own wealth, so you can save up for your own retirement. Debt consolidation can help you begin your path to financial freedom.

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