Social Security: Why Those Under 45 Should Plan To See Their Benefits Cut by at Least 10%

How much longer will this meeting be.
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The first thing younger Americans should know about Social Security is that it’s not going away, despite what you might have heard. The second thing you should know is that your Social Security check will probably be a lot smaller than the ones your parents and grandparents got.

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If you are younger than 45, you can expect to see your Social Security benefits cut by 10% to 15% from current levels, according to Joe Elsasser (founder and president of Covisum, a provider of Social Security claiming software). That percentage drops to 5% for those 45 to 60 years old, Elsasser told CNBC. The reasons vary, but many have to do with changes to the program that are currently under consideration.

Those changes include proposals from some lawmakers to raise various age thresholds for Social Security. Some advocate raising the full retirement age (FRA) by one to two years. Currently, the FRA is either 66 or 67, depending on when you were born. Raising the full retirement age would essentially amount to a “benefit cut,” Elsasser said.

Other lawmakers have proposed raising the initial age you qualify for retirement benefits (currently 62 years old) and also changing the highest age for delaying benefits (currently 70).

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Supporters of these moves say they will help the Social Security Administration (SSA) remain financially solvent. As it stands now, Social Security cash reserves are expected to run out of money by the middle of next decade. When that happens, the program will have to rely on income taxes for funding — and taxes are expected to cover only about 78% of the benefits each year after that.

Social Security Cash Reserves Running Low

Cash reserves have drained quickly in recent years due to the influx of retiring boomers. At the same time, people are living longer these days, which means they are also collecting Social Security longer.

The good news is, Social Security will not go bankrupt, according to Anqi Chen, a senior research economist at the Center for Retirement Research at Boston College. The bad news: She expects benefits to be reduced even more than Elsasser projects if no changes are made to bolster the program.

“If nothing is done, then future benefits will eventually be reduced to about 80% of what current benefits are,” Chen told The New York Times. “That’s not ideal, but it’s very different from saying that we’re not going to get Social Security at all.”

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More: What Is the Average Social Security Benefit at Age 62?

That’s why it’s important for people of all ages — especially millennials and Gen Zers — to start planning for the worst-case scenario: a benefit cut of 24% or more for future retirees. This means doing all you can to build retirement savings in other areas, such as through 401(k) plans, IRAs and investments, experts say.

“The real importance of planning is just making sure you have all your bases covered,” Elsasser said.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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