Social Security: Which Generation Plans To Rely Most Heavily on It?

Middle aged woman looking out of the window in the boardroom.
monkeybusinessimages / Getty Images/iStockphoto

The future of the Social Security program as we know it remains uncertain, and many Americans are aware that the program could look different by the time they retire. More than 40% of Americans can imagine a time when Social Security no longer exists, according to a new Northwestern Mutual report.

Despite this, the average American said they are relying on Social Security to provide 28% of their overall retirement funding — that’s more than they plan to rely on personal savings (22%) and equal to retirement savings (28%), the report found. But some generations plan to be less dependent on Social Security than others.

Here’s a look at the generations that plan to rely on Social Security the most and the least.

Boomers Plan To Rely on Social Security More Than Other Generations

Boomers expect to be able to fund 38% of their retirement with Social Security — a higher percentage than any other generation. But is this realistic?

“For some boomers, 38% may be the right number, but for others, it will be unrealistic,” said Tim Harrison, wealth management advisor with Harrison Financial Services – Northwestern Mutual Private Client Group in Omaha, Nebraska. “If they have paid off their home mortgage and other large debts, if they live in a more affordable area, if they have modest retirement goals and if they boosted their Social Security benefit by delaying their Social Security benefits claim until age 70, they may be able to depend more on Social Security than other retirement funds.”

Are You Retirement Ready?

However, this won’t be the case for all boomers.

“For others who still have debts, want a more lavish lifestyle or claimed Social Security benefits earlier on, it may be challenging for them to count on the safety net to meet their needs,” Harrison said.

Millennials and Gen Z Expect To Fund Less Than 20% of Their Retirement With Social Security

The report found that millennials expect to fund 19% of their retirement with Social Security while Gen Z expects to fund just 15%. (Gen X falls in between millennials and boomers, expecting to fund 27% of their retirement with Social Security.)

Harrison believes it’s a good idea for younger generations to temper their expectations about how much retirement funding they can count on Social Security to provide.

“If America’s Social Security Trust Fund reserves run out of money by 2033 — as experts predict — then it’s possible that Americans may see some kind of cut to their Social Security benefits,” he said.

Harrison notes that how much young Americans will be able to rely on Social Security depends not only on the future of the program, but also on their unique financial situations and expectations for retirement.

“Every American has a unique life and distinct goals, so to be safe, each person will need to crunch the numbers and build a financial plan for themselves,” he said. “For example, low earners with modest retirement plans and low debts may still be able to count on Social Security for an even larger proportion of their retirement savings — perhaps 40%. For high earners with more debt and bolder lifestyle expectations, 20% is closer to reality.”

Are You Retirement Ready?

How Millennials and Gen Z Can Compensate for a Lack of Social Security Income

Since millennials and Gen Z are planning to fund less than 20% of their retirement with Social Security, they will need to plan for additional ways to fund the other 80%.

“It’s important for younger generations to build a financial plan that protects their wealth and grows future prosperity so they can retire on their terms,” Harrison said. “Strategically investing early, often and in alignment with their goals, risk tolerance and time horizon is always a wise choice.”

He also recommends including permanent life insurance as part of a retirement plan.

“Permanent life insurance is helpful for future millennial and Gen Z retirees because instead of selling investments at market lows, they can tap the cash values that build up within the policy to pay for expenses,” Harrison said. “When a financial plan elegantly combines investments with permanent life insurance and annuities, it’s proven to deliver better financial outcomes more often than an investing-only approach.”

Harrison also noted that retirement for younger generations may look different than what we think of as a traditional retirement today.

“It’s important to remember that retirement funding is only one part of the equation, and people have other options to live comfortably,” he said. “Many may be able to choose to work longer or rethink their retirement lifestyle. Planning ahead always provides people with the greatest opportunity to consider ways to enjoy life today without sacrificing tomorrow’s dreams.”

More From GOBankingRates

Are You Retirement Ready?


See Today's Best
Banking Offers