If you’re a millennial, should you expect to receive Social Security someday? According to a 2022 report from HealthView Services, nearly half of the generation born between 1981 and 1996 strongly or somewhat agrees that they “will not receive a dime” from Social Security benefits.
The pessimism is understandable given recent forecasts. Social Security’s retirement trust fund is expected to be depleted by 2033, according to the latest trustee report.
But if you’re a millennial, things aren’t as bleak as you might think.4 things every millennial should know about the future social security.
1. I am relieved because I can receive social security
The claim that Social Security is collapsing is not entirely correct. Indeed, unless Congress takes action by 2033, Social Security retirement trust funds will dry up. But Social Security is a pay-as-you-go program. The plan is funded by a 6.2% Social Security payroll tax that you and your employer pay up to the annual wage cap ($160,200 in 2023).
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As long as people keep working and paying payroll taxes, Social Security will continue to exist. But if the trust were to dry up in 2033, as expected, the payroll tax would only cover 77% of projected benefits.
Translation: If you’re a millennial, don’t worry about running out of Social Security before you retire. However, it is wise to prepare for the worst-case scenario where you may only receive 77% of your promised benefits.
2. Don’t expect your severance pay to cover your severance pay
Millennials have far less retirement security than their parents and grandparents. And it’s not just because of concerns about social security solvency. With pensions largely replaced by defined contribution plans like 401(k)s, retirement income for young workers is an investment decision.
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But there’s even worse news. Social Security benefits continue to lose purchasing power. adjustment of cost of living Not keeping up with the actual costs of retirees. Elderly households spend a higher share of their income on health care and housing than working-age households, and these costs typically rise faster than overall inflation. The Alliance for Senior Citizens estimates that in 2022, the average purchase of social security checks will be about 40% lower than he was in 2000.
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What does that mean if you’re a millennial? Whatever Social Security you currently receive is unlikely to be extended in the same way that it was for your parents and grandparents. For millennials and Gen Z, retirement savings are even more important.
3. You can also increase your social security checks
If you’re concerned about a cut in benefits or a continued loss of Social Security purchasing power, you have the option to increase future checks. One good strategy is to plan to delay as long as possible. Retirement benefits are available to him from age 62, but he is eligible to receive full benefits until age 67. full retirement age For people born after 1960.
Delaying it further might get you the most out of Social Security. For each year past full retirement age until her 70th birthday, he earns an 8% delayed retirement credit.
4. Look to history for comfort
The future of Social Security may seem bleak. So it might be a little comforting to know that this isn’t the first time Social Security has been in danger of running out of its reserves.
There are nine years left before social security credibility is eroded. When the last major social security reform was passed in 1983, the reserves were only months away.
Congress passed many changes. They phased in both the payroll tax rate and the full retirement age, and began taxing a portion of social security for retirees. There are a number of steps that Congress could take in the next few years, including removing the high-income wage cap, raising payroll taxes, and raising the full retirement age again.
If you’re a millennial, perhaps the smartest thing to do is plan for retirement on the assumption that Congress will do nothing and you’ll get fewer benefits. However, given that Congress still has nine years to work and that Social Security is a very popular program, it is likely that lawmakers will take steps to maintain benefits for future generations.
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