While it certainly comes as no surprise that the Social Security trust fund is bleeding, a recent report now predicts the fund will show up in the morgue sooner than originally thought. This cold, hard fact that Social Security won't be there for us further emphasizes the importance of our own retirement planning. So what actions can we take to make sure we'll be prepared and self-reliant?

Money really does grow on trees
The best place to invest for retirement is in an employer-sponsored retirement plan, typically a 401(k). Not only do your personal contributions reduce your tax liability dollar-for-dollar today, your money grows tax-deferred. And even more enticing, many employers fork over free money.

Chances are very good that if you're offered a 401(k) or a similar retirement plan through your employer, they bestow you with a 401(k) match. It'd be small-f foolish not to contribute at least the bare minimum to pocket your employer's free money. Employers also often reward employees with annual profit sharing distributions, which are deposited in our 401(k)s and allocated into the investment selections we've chosen.

Souped-up savings
If you've contributed at least enough to take advantage of your 401(k) match and if you meet certain income requirements to qualify, then strongly consider opening and funding a Roth IRA -- a tax-free retirement account.

Consider more aggressive, growth-oriented investments for funding your Roth IRA since they afford you the best tax-free bang for your investment buck. This is especially true for young investors who have more time for the tax-free growth to compound.

Apple (NAS: AAPL) and Google (NAS: GOOG) are fantastic growth stocks to consider for your Roth IRA. Apple recently reported an earnings blowout, posting marked improvements in gross margin and $14 billion in cash flow from operations last quarter. The company has a ton of cash and still appears a good value considering its five-year expected PEG ratio of 0.65. Even with its equally high price tag, Google appears to be a good buy, too. Google's five-year expected PEG ratio of 0.78 suggests that the company is undervalued. And year-over-year quarterly earnings grew more than 60%. Both Apple and Google have great management in place, fantastic sales and earnings growth, and valuations which continue to entice.

If you are closer to retirement, or favor more conservative investments, dividend-paying stocks provide excellent opportunities since their normally taxed dividends grow tax-free in a Roth IRA. In particular, I like Intel (NAS: INTC) because it pays a 3.1% dividend yield and has grown its payout by an average of 13% per year over the past five years. The chip maker's five-year expected PEG ratio of 0.93 suggests that it's still a good value. AT&T (NYS: T) pays a beautiful 5.7% dividend yield and has seen 4% average annual dividend growth since 2007 -- and more importantly, the telecom giant has raised its dividend for 28 consecutive years.

Roth IRA on steroids
For investors who may be excluded from participating in a Roth IRA due to the income requirements, a life insurance retirement plan, or LIRP, may be for you. LIRPs are little-known retirement planning vehicles that are designed to merge the benefits of tax-advantaged life insurance and retirement savings.

Think of a LIRP as a Roth IRA on steroids. It's intended to provide you with tax-free retirement income via a life insurance policy featuring potential market appreciation and a life insurance death benefit for those who depend on you. Insurance companies sell the policies that get used in LIRPs. Of course, like all investments, LIRPs aren't one-size-fits-all. They only work if you're insurable and can diligently and systematically make contributions for about a decade before taking any distributions.

Take the reins
Regardless of when or how our lawmakers ultimately address our entitlement program mess, the best retirement strategy is the one you proactively craft for yourself. Make it a point to become knowledgeable about your investment options, and develop a plan for creating your own financial peace of mind.

If you'd like to learn more about building your nest egg, we've got a free report that will help you do that with three great stocks.

At the time this article was published Fool contributor Nicole Seghetti owns shares of Apple, Intel, and AT&T. The Motley Fool owns shares of Google, Intel, and Apple. Motley Fool newsletter services have recommended buying shares of Google, Apple, and Intel, as well as creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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The Awful Truth About the Social Security Trust Fund

For more than 25 years, the United States government has been systematically depositing all surplus revenue from the 1983 payroll tax hike into the general fund and spending it on wars and other government programs. Every dollar of the $2.6 trillion in surplus revenue generated by the 1983 payroll tax hike has been spent on other programs. Not a dime was saved, and unless money is saved, it cannot be invested. The government has replaced the money with $2.6 trillion in IOUs, which are nothing more than accounting records of how much Social Security money has been spent. The IOUs, called special issues of the Treasury, are not bonds in the true since of the word. They have no monetary value and cannot be sold. So Social Security has nothing in reserves except those IOUs that may or may not be repaid. It is because of this terrible predicament that conservatives are pushing so hard to cut Social Security benefits. They don’t want the government to repay the looted money. The surplus money was supposed to be used to buy public issue marketable Treasury bonds in the open market. If that had been done, these marketable bonds could be sold in the open market at any time by the Social Security trustees to raise cash with which to pay benefits. But the IOUs cannot be sold, and the government does not have the money to repay the money it has "borrowed" or "stolen." In addition, the government has never paid a dime in cash interest on its debt to Social Security. It "pays" interest simply by issuing more of the same worthless IOUs that are already in the trust fund.

On January 21, 2005, the Comptroller General of the U.S. Government Accountability Office (GAO) issued the following indisputable statement. "There are no stocks or bonds or real estate in the trust fund. It has nothing of real value to draw down."

If you are interested in finding out more about the "great Social Security theft," please visit my website at www.thebiglie.net, where you can download a free copy of the book, “The Looting of Social Security.”

Allen W. Smith, Ph.D.
Professor of Economics, Emeritus
Eastern Illinois University

April 26 2012 at 12:18 PM Report abuse rate up rate down Reply