Social Security was never intended to be a 'pension plan', it was intended to assist the person who retired to have something to put toward their savings and remaining lifetime.
Social security has always had a retiree benefit portion of it. That's exactly what pensions are for.. retirement benefits. In context, the poster was downplaying the need for savings due to the presence of Social Security, much like someone who is expecting a pension payout would. But SS can't pay anywhere like a traditional blue collar union pension would. I wouldn't recommend ANYONE count on SS as their retirement plan today. What you get from SS would just be 'extra'. I mean even today, the retirement age has been pushed all the way up to 67.. and benefits are falling well behind reasonable costs.
Most people don't look to work till they die.. they'd like to retire and enjoy it while they can. Counting on SS for retirement will basically make you work until you can't anymore.
I hope that you misspoke. Longer term savings, such as retirement, is the portion of your savings that you're allowed to take on more risks. Short term savings, such as an emergency fund, should have zero risk. You don't want any fluctuation in the value of the principal of funds that you may need access to within the next 6 months.
I didn't misspeak, you just kinda crossed what I was saying. I don't look at emergency funds as savings at all - they are just that.. emergency funds.
What I was saying about savings (not emergency funds) was, your risk factor for savings should be based on the lifespan of the savings. If you have a long period before they are needed, low risk, steady growth is the preferred strategy. You have a long time for the money to grow, so you can play safe. But if you are a person who starts saving for retirement late in life, and only has 5-15 years instead of 30+ years for the money to work, you will find financial people will point you towards higher risk investments looking for quicker returns. You simply don't have the decades to allow slow growth to accumulate.
The gist of what most posters are saying follows a tried and true method: by creating different savings "buckets", you physically segregate your assets based on their purpose: 1)some sort of retirement account for long-term goals, which can be invested a variety of ways based on the owner's time frame and risk tolerance; 2) an emergency fund to cover 3-6 months' worth of living expenses, which should be in a savings or money market account; and 3) any other buckets you deem necessary - vacation, education, "play" money, etc.
Yup..
I for instance keep
- a checking account for monthly bills..
- a second savings account for short term savings month to month (or simply to hide money out of the monthly checking). I put gift money, bonuses, surplus, etc in there.
- A dedicated savings account for my 6m emergency fund (pays similar to short term CD/Money market rates) that I leave alone
- My 401k maxxed out
- individual investment accounts (mutual funds) for each of my kids savings
- investment accounts (mutual funds and stocks) for my long term savings
I pay for vacations out of the second savings account. I am not positive cash flow enough at this point (kids expenses are still ramping up like crazy right now) to put money in savings regularlly at this point. But when I have spikes in funds, I always try to move money to long term savings rather then saying 'oo, what can I buy now??'
By spending wisely, I can afford what I want typically, still have nice toys (my pinballs for instance), and still have things put aside for long term savings. It just means things take a little longer to get the piles big enough for big toys.
For instance, this last year we did a cruise on the Dream. The wife wanted to another one with her sister and her family too. So I signed up for another one while on board to get the better booking rates and promotions. But I set the trip for 2013 instead of 2012 because I know this next trip will be 10k easy.. and I don't want to drop that kind of money on a Disney trip each year. But with 2 years to put money aside for it.. it won't be as big of a hit.
Maybe the Dec. 2012 reference was not enough.