Here’s What Social Security Will Look Like by the Time Millennials Retire

Millennials — people born between 1981 and 1997 — face unique concerns when it comes to saving for retirement. Previous generations could rely on company pension plans, which are declining in number, and Social Security, which is experiencing deficits that threaten its existence. Millennials need to plan strategically and early in order to adequately prepare for retirement.

How Long Millennials Have to Work Before Retiring

Estimating a retirement age of 64 based on Gallup poll data, the oldest millennials who are now 34 years old will start retiring in about 30 years, and the youngest millennials who are now 18 will start retiring in approximately 46 years. What Social Security will look like for them is a critical question as they plan for retirement.

This year is the first time millennials are expected to surpass baby boomers as the largest segment of the workforce — one-third — according to the Pew Research Center. Estimating their retirement income, saving and investing now are essential steps for millennials to take whether or not the Social Security program changes dramatically over the next several years or decades.

Read: How to Become a Millionaire Using Just Your 401(k)

What Exactly Is Social Security?

It’s something that many millennials might not receive. Social Security is primarily the Old-Age, Survivors, and Disability Insurance federal program, which keeps approximately 20 percent of all Americans over the age of 65 above the poverty line.

The program is funded through payroll taxes that are put in the Social Security Trust Fund, which is managed by the government. It is the largest federal spending program, and last year, more than 59 million Americans received almost $863 billion in Social Security benefits, according to the Social Security Administration. Look at your paystub to see how much you’re paying into Social Security every pay period.

2015 Social Security Payment Breakdown

Recipient Average Monthly Benefit
Retired Workers and Dependents $1,294
Disabled Workers and Dependents $1,146
Survivors $1,244

What Will Social Security Be in 30 Years?

“Social Security will change because it is unsustainable at its current rate,” said Jamie Hopkins, a professor at The American College’s Retirement Income Program.

According to a summary of the 2015 Social Security annual report, Social Security’s rate of expenditures have exceeded its income since 2010 — and the government has difficulty paying benefits with no surplus.

It projects that the cash-flow deficit will average about $76 billion between now and 2018 and will continue to climb and worsen as the number of beneficiaries — mostly baby boomers — continues to grow at a faster rate than the number of workers.

Will Social Security End?

“Social Security will still exist because it is needed and we made a decision as a country to take care of our elderly,” said Hopkins. Nearly one-third of elderly Americans rely on Social Security for basic necessities, and Hopkins believes that a complete dissolution of the system would throw the country into chaos.

Bearing the reserve depletion projections in mind, however, changes to benefits are likely forthcoming. According to the Social Security 2015 report summary, “Lawmakers should address the financial challenges facing Social Security and Medicare as soon as possible. Taking action sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.” 

“There may even be a testing portion of Social Security that would reduce or completely eliminate benefits for those individuals with large amounts of retirement income or wealth,” said Hopkins. It’s hard to say what Social Security will look like in 40 years, but a complete overhaul of the program is inevitable, according to Hopkins.

Half of all millennials surveyed by the Pew Research Center in 2014 believe that Social Security will go bankrupt before they retire. However, with government data on tax income pointing to a continuation of about three-quarters of scheduled benefits through the end of 2089, millennials will likely receive some Social Security — just possibly not as much as Americans receive now.

How Much Social Security Will Millennials Receive?

Let’s assume that the government will pay three-quarters of scheduled benefits through the end of 2089, as per the current projection. Using the current average retiree’s Social Security monthly payment of $1,294, and assuming a 2 percent inflation rate, a retiree’s benefit will be $2,587.83 in 35 years. If the government will only pay a maximum of three-quarters of that amount, the total Social Security monthly payment will be $1,940.88.  

How Much Do Millennials Need to Save for Retirement?

How much you should save per year depends on your age and how long you plan on working until retirement. “You will need roughly 70 percent of your current income in retirement to maintain the same standard of living,” said Hopkins.

Here is an example of what a millennial should save, assuming he will receive no money from Social Security:

Max, 31, Tech Developer

 Current Annual Income  $80,000
 Planned Retirement Age  65
 Life Expectancy  85
 Current Savings  $10,000
 Desired Annual Income in Retirement  $60,000
 Average Investment Return  5 percent
 Amount to Save Annually to Reach Goals  $8,172
 Amount to Save per Month  $650
 Total Saved for Retirement  $747,733


If Max could depend on the Social Security projection of $1,940.88, however, he would only need to save $275 per month instead of $650 per month for a similar retirement savings plan.

Related: What’s the Best Way to Invest My Retirement Money?

What Millennials Should Do Right Now for Their Retirement

“Contrary to popular belief, millennials are good savers,” said Peter Drake, a Fidelity retirement expert. In fact, according to a survey from T. Rowe Price, millennials save 8 percent of their paycheck, which is close to the 9 percent that baby boomers save — and since baby boomers are closer to retirement, they’re expected to save more.

Read: 42 Ways to Save For Retirement

Since millennials don’t know how much government support they will have during retirement, they need to start saving now. Here are a few good retirement savings tips:

  • Pay off all debt first to avoid accruing interest.
  • Get a 401(k) match from your employer if it is offered.
  • Save your raises and bonuses and continue living on your previous income.
  • Put money into an IRA automatically.
  • Aim to allocate 15 percent of your paycheck into retirement savings.

If this all seems insurmountable, just remember that even setting aside a small amount of each paycheck will pay off later. For example, $25 a week invested at 5 percent interest for 40 years can grow to more than $140,000. And when it comes to capitalizing on the power of compound interest, the sooner you start saving, the better.

  • Peter Hurley

    As a millennial you need to be saving between 20% to 50% of your after tax income. Taxes will be 20% to 30% higher when we will be required to financially support our baby (boomer) parents who got their cake and ate it too. Pump up your 401k then, it is a free 20% to 30% guaranteed return. The demographics prove millennials won’t ever get Social Security. Our parents were too busy believing in false bubble wealth to ever actually save any real money. QE infinity has propped up their false economic beliefs. The debt hangover from their irrational fiscal policy will be dealt with by their low income, student debt strapped children. Greece and the current US are prime examples why democracy will always fail in the long run as people perpetually vote free “entitlements” they do not deserve. All I know is that I am not the one who got great paying jobs out of high school and lived in oversized homes, were able to afford kids and never saved, yet expect 20 years of retirement handed over from the next generation. When the shit hits the fan, I will definitely be on the opposite side. I can’t say the same for baby boomers. At least millennials can alter their lives to the turbulent future ahead.


      Peter: suck on it you whiney little twit ! It’s time you grew a pair and put that energy towards something we called WORK. Typical crybaby, entitled, wuss of today. If you think we owe you anything your sadly mistaken. Nobody gave me jack crap and you, my wussified generation whatever, can put on a backpack and live under a freeway if your not into oversized houses. PS: Im sure your parents feel the same way and are quite embarrassed to have raised such a dickhead ingrate of a son !!!!!

      • Peter Hurley

        Sounds like someone is loosing their money in the stock market recently.