Will Millennials Receive Social Security Benefits?
Many are Concerned Retirement Funds Won't be Available
If you're a millennial worried about the future solvency of Social Security, you're not alone. In fact, 79% of workers believed they would have a harder time achieving financial security in retirement, and 76% percent were concerned Social Security would not exist when it came time for them to retire, a recent survey found.
The good news is that the future of Social Security for millennials will likely not be as bleak as expected.
“Young people frequently ask: ‘Will Social Security be there for me?’" states Carolyn Colvin—former acting commissioner of Social Security. "I take this question very seriously, and I am sure Social Security will be there in the future.”
Although the Social Security Board of Trustees has reported that Social Security trust fund reserves will likely run out by 2034, it doesn’t mean that the program will come to an end. Once these reserves run out, people and employers will still be paying the required Social Security payroll taxes, though that money is expected to only cover 75% of expected future benefits.
In other words, if nothing changes, the amount of Social Security benefits paid out will likely be smaller, which means that a larger portion of millennials' retirement funds will need to come from sources beyond Social Security.
How Much Social Security Money Will I Receive?
If you're a millennial, it's still a bit early to determine exactly what Social Security benefits would be available to you and at what age you'd be able to access them.
A number of factors determine the amount of Social Security benefits you can receive, including how long you work, how much money you make each year, and the age at which you begin receiving benefits. Any future changes to related laws could also impact your benefit amount.
But if you want a number for comparison's sake, the average Social Security benefit (i.e. monthly payment) in June 2019 was $1,471. Considering this, it's safe to assume that you should not rely on Social Security entirely for your post-retirement income.
Social Security and the Cost of Living
Another reason to make sure you have another source of retirement income is to look at what has been happening the purchasing power of the money that Social Security pays out.
For example, Social Security benefits have lost 30% of their buying power since 2000, because the annual cost-of-living adjustment (COLA) to Social Security retirement benefits has not been enough to keep up with inflation.
However, those who receive Social Security benefits usually get this automatic increase in the amount they receive. For example, Social Security benefits will increase by 1.6% in 2020. While this may sound great, keep in mind that in 2019, the rate of inflation in the U.S. was 2.3%.
While Social Security may not be completely out of the picture for millennials who would someday like to retire, it isn't a fool-proof plan, nor is it a means to fund one's entire retirement.
If you want to retire comfortably, then work on creating a resilient retirement plan. Determine what and how you need to save now, i.e. funding a 401(k) or IRA, so that you can retire no matter what happens with Social Security.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.
Transamerica Center for Retirement Studies. "18th Annual Transamerica Retirement Survey," page 25. Accessed Feb. 12, 2019.
Social Security Administration. "Social Security Funded Until 2034, and About Three-Quarters Funded for the Long Term; Many Options to Address the Long-Term Shortfall." Accessed Feb. 12, 2020.
Social Security Administration. "A Summary of the 2019 Annual Reports: What Are Key Dates in OASI, DI, and HI Financing? Accessed Feb. 12, 2020.
Social Security Administration. "Retirement Estimator." Accessed Feb. 12, 2020.
Social Security Administration. "Social Security Fact Sheet." Accessed Feb. 12, 2020.
The Senior Citizens League. "Social Security Benefits Lose 30% of Buying Power Since 2000." Accessed Feb. 12, 2020.
Social Security Administration. "Cost-of-Living Adjustment (COLA) Information for 2020." Accessed Feb. 12, 2020.
US Inflation Calculator. "Current US Inflation Rates: 2009-2019." Accessed Feb. 12, 2020.