Will Social Security be there for Millennials?

If you were to ask them, there’s a good chance Millennials would say no.  According to a Transamerica Center study, as many as 80% of Millennials do NOT believe they’ll receive Social Security benefits when they retire—despite having little to no personal retirement savings.

Given the bleak projections about Social Security’s future, it’s hardly surprising younger generations have adopted such a negative attitude toward the program.  As it stands, it’s true to say Millennials won’t be able to retire comfortably if they rely on Social Security alone.  

If Congress fails to intervene, by 2035 there will be no choice but to dramatically slash benefits. Beneficiaries will have to find a way to deal with cuts nearing 25%.  Social Security only replaces around 40% of a worker’s income already.  For Millennials it would replace even less.

But is there reason to think Millennials won’t receive their Social Security benefits at all?  

Absolutely not.

To say that Social Security won’t be there when young people today retire is more an expression of anxiety than it is a statement of fact.  Today’s young adults came of age during a housing crisis and a major economic recession, and they struggle to save for the future while paying down historic levels of student debt.  

For many of them, focusing on the financial difficulties of the present supersedes focusing on the future. And in their experience the future is often unstable and unreliable.

But the silver lining about Social Security is Social Security will never simply disappear.  Unless everyone in the country up and decides to stop working or paying taxes, it’s just not true to say Social Security will just stop.

Social Security is pay-as-you-go.  That means as it collects revenue in the form of payroll taxes, that money immediately flies out the door to pay scheduled benefits.  Social Security’s real funding problems come from the steady drain on surplus funds.  

Currently, there is more of a demand on Social Security’s reserves than money coming into the program. Once the reserve is exhausted, cuts will have to be made to make sure all beneficiaries can draw a portion.

However, this has nothing to do with the continued payroll taxes coming into the Trust Fund.  As long as workers pay the FICA tax, there will ALWAYS be money in Social Security.  Millennials may not be able to rely on the program as heavily, but they WILL receive their Social Security benefits.

This means two important things for today’s young people:

Preparing for retirement now is critical.  

Millennials, more than their parents and grandparents, will need to make smart financial moves to make sure they can maintain a comfortable lifestyle during retirement.  That means building a solid independent savings—the primary source of income they’ll depend on.  Millennials can’t expect to survive solely on Social Security.  It should strictly be viewed as a reliable supplement to a 401(k), IRA, personal retirement savings account, or other investments.  

As well as building a healthy nest egg, Millennials also need to familiarize themselves with Social Security filing rules and strategies.  Most Americans file for retirement as soon as they can—age 62 for most. But doing so results in a permanent benefit cut that will be substantial over time.  Millennials may need to plan to file later to maximize their benefits.

There is no better time than now to get involved with Social Security advocacy.

We’ve said it before and we’ll say it again: Social Security is a Millennial issue.  Leaving Social Security policy to current retirees and focusing only on the present is massive pitfall we want to encourage young people to avoid. One day, Social Security’s future will be their present, and by then, it may be too late to fix for them.

Knowing how severe the future financial hurdles may be for Millennials when they retire, they need to be proactive in calling on their legislators to address Social Security insolvency and adequacy.  Social Security funding shortfalls are best fixed well before they affect retirees.  And the fix will impact Americans of all ages, so every American needs to be involved.

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