In 1934, President Franklin D. Roosevelt placed the "security of the men, women and children of the Nation first" taking the first steps toward establishing a national Social Security program for the protection of its citizens. The program was designed to assure a continuing income to families when the worker retires, dies, or becomes disabled.

What could not be foreseen in 1934 were the tremendous demands that would tax the system into insolvency. Medical science and other health advances has caused people to live longer than their intended benefits.

The statistics are startling. In 1950, there were 16.5 workers contributing to the Social Security system for every one person receiving benefits. Today, the ratio is 3.3 to 1. By the year 2030, however, there will only be two workers supporting each Social Security recipient, three out of ten of which will be disabled.

Having a retirement plan in effect is the only means to combat the grim outlook for social security benefits. Having enough money at retirement will only be the result of a carefully planned strategy, one that depends on planning and saving for it - now.

Sean Brown, a personal financial advisor with American Express Financial Services recommends that it is never too late to put away money for retirement. He assures that there are several financial products that will build equity, and several strategies that will reduce your tax liability when you want to put the money to use.

"Having a relationship with somebody who can manage your accounts is important for several reasons. Most people don't have the time and knowledge to spend on their finances - they are too busy working and raising families. A trusted financial advisor attends to the client's financials every day and they are also familiar with the most current investment strategies," explains Brown.

"As self-employed wage earners, real estate agents have a couple of good options to set up their retirement plans. One plan is called SEP (Simplified Employee Pension) in which they can contribute up to 13.04% of taxable income, or up to $24,000 per year toward retirement. Another option is utilizing a simple IRA which allows you to contribute up to $6,000 per year of your taxable income. Another tool that can reduce taxes at retirement is through the use of Roth IRA's which will give you growth potential, tax deferred growth and tax-free income at retirement."

Retirement products fall into three basic categories - fully taxable (pre-taxable savings, IRA's, SEP's), partially taxable (annuities, mutual funds, stocks), and tax-free (municipal bonds, CV insurance, Roth IRA's). "You want to diversify your retirement plan so that you don't have a large tax liability at retirement," he continues. "By having retirement investments in each category, you lower your tax liability."

Other strategies also exist, but are best examined on a case by case basis. Every individual, their abilities and their goals are different, so a retirement strategy for one agent may not be the right plan for another.

Brown cautions that most people have a tendency to deal with financial issues only when problems arise or when it is too late to be truly effective. That is why any financial strategy must also include a means of protecting your number one asset - your ability to earn income. Disability insurance is a must for any self-employed person and seques perfectly with a proactive retirement plan. It doesn't take much to get started with both insurance and a retirement plan - you can begin with as little as $100 a month.

"If you are starting from ground zero, it is important to put something into place whether it is a small amount or a large amount. Don't worry about trying to play "catch up." Just do what you can and you will be amazed at how you can make a small amount grow over the years," suggests Brown.

Published: July 13, 1998

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