Should Millennials Really Be Worried About the State of Social Security? Experts Weigh In
Written by
Josephine Nesbit
Edited by
Angela Corry
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Millennials have enough on their plate — rising housing costs, student debt, higher interest rates, etc. Now they are adding Social Security to the list of concerns.
For years, headlines have warned that the Social Security program is running out of money, leaving many wondering if there will be anything left when they retire. Social Security’s trust fund may potentially dry up in the 2030s, but even if they do, payroll taxes will continue to cover a majority of Social Security payments.
Even so, experts say changes are coming. Here’s what to know about the future of the Social Security program and how to prepare for retirement.
Should Millennials Be Concerned?
“It is no secret that the Social Security trust fund is facing trouble. Current projections say that the fund will be able to pay 100% of benefits through 2035. Then, if Congress does not act, benefits will be reduced by about 21 to 22%,” Krisstin Petersmarck, National Social Security Advisor (NSSA) and investment advisor representative at New Horizon Retirement Solutions in Bloomfield Hills, Michigan, wrote in an email.
Social Security is funded primarily through payroll taxes from current workers, but as the Baby Boomer generation continues to retire, the number of beneficiaries is outpacing the number of workers paying into the system.
“The fact is, more people are leaving the workforce than entering it,” Petersmarck added. “So, millennials should be concerned.”
According to the Social Security Administration’s most recent Trustees Report, there were 2.7 workers per beneficiary in 2023. By 2040, the ratio is projected to drop to 2.3 when the baby boomer generation has largely retired and will continue to decline gradually thereafter due to longer life expectancies.
How to Prepare for Retirement
Millennials still need to prepare for retirement, with or without Social Security. The SSA has stated that Social Security only replaces about 40% of annual pre-retirement earnings on average.
“I am a financial advisor, building an independent planning practice designed for millennials,” explained Jonathan Ford Jr., president, founder and investment advisor at JFJ Advisory Services in Morrow, Ohio. “I help every one of them plan for retirement as if Social Security won’t be around forever.”
Ford tells his clients that they must take responsibility for their own retirement. “If necessary changes are made to preserve Social Security, then that would just be the cherry on top. We could consider early retirement or spending more and enjoying more during retirement,” he stated. “It’s a classic case of ‘plan for the worst, hope for the best.'”
As for steps millennials can take right now, Ford recommends an employer 401(k) as a starting point, especially if they offer a match. If not, then an IRA is another option he suggests that offers tax savings.
“Time will be any young investor’s most valuable asset,” Ford noted. “If they are proactive and start saving now, then they won’t have to worry when they get to retirement. Even saving a small part of your paycheck routinely can add up over time.”
More From GOBankingRates
