It is well known that many millennials are concerned about the future of the Social Security system. According to a survey conducted by the Transamerica Center in 2019, 77% of workers are worried about the absence of Social Security when it comes time to retire. Caroline Colvin, former CEO of Social Security, says, “Young people often wonder: Will Social Security be there for me? I take this question seriously, and I am confident that Social Security will be available in the future.”
Taking Social Security and its Cost
Reports from the Social Security Board of Trustees indicate that the Social Security Trust Fund for retirees and survivors will be depleted by 2033. However, this does not mean that the program will end. People and employers will continue to pay the required Social Security taxes even when these reserves run out. It is expected that this amount will cover only 76% of future benefits.
How Much Money Will I Receive from Social Security?
It is still too early to know exactly what benefits will be available for millennials when they reach retirement age. First, it may be difficult to determine the age at which you will be able to access benefits. There are several other factors that also affect the amount of benefits you can receive.
These factors include your work duration, how much money you earn annually, and the age at which you start receiving benefits. Any future changes in related laws could also affect your benefit amount.
The average monthly retirement benefit for retired workers was $1,558 in August 2021. Therefore, it is safe to assume that you should not rely fully on Social Security for your income after retirement.
Social Security and the Cost of Living
Another reason to ensure you have another source of retirement income is to consider what happens to the purchasing power of the money paid by Social Security. Benefits have lost 33% of their purchasing power from 2000 to 2019. The annual adjustment for the cost of living for Social Security retirement benefits has not been sufficient to keep pace with inflation.
Individuals receiving benefits automatically get a cost-of-living adjustment in their payments. Social Security benefits increased by 1.3% in 2021 and will increase by 5.9% in 2022. The annual inflation rate in the United States was 5.3% for the 12 months ending August 2021.
Social Security may not be entirely off the radar for millennials who wish to retire someday. But it is not a guaranteed plan. It is not a means to fully fund your retirement.
Conclusion
Work on creating a plan if you want to retire comfortably. Determine how much money you need to save now. Decide how to do this, such as funding a 401(k) or IRA, so that you can retire regardless of what happens with Social Security.
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Sources:
Transamerica Center for Retirement Studies. “19th Annual Transamerica Retirement Survey: A Compendium of Findings About U.S. Workers,” Page 20. Accessed Oct. 25, 2021.
Social Security Administration. “Social Security Funded Until 2034, and About Three-Quarters Funded for the Long Term; Many Options to Address the Long-Term Shortfall.” Accessed Oct. 25, 2021.
Social Security Administration. “A Summary of the 2021 Annual Reports.” Accessed Oct. 25, 2021.
Social Security Administration. “Monthly Statistical Snapshot, August 2021.” Accessed Oct. 25, 2021.
Social Security Administration. “How the Retirement Estimator Works.” Accessed Oct. 17, 2021.
The Senior Citizens League. “2019 Loss of Buying Power Study: Social Security Benefits Lose 33% of Buying Power Since 2000,” Page 2. Accessed Oct. 25, 2021.
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Social Security Administration. “Fact Sheet: 2021 Social Security Changes,” Page 1. Accessed Oct. 25, 2021.
Social Security Administration. “Fact Sheet: 2022 Social Security Changes,” Page 1. Accessed Oct. 25, 2021.
US Inflation Calculator. “Current US Inflation Rates: 2009-2020.” Accessed Oct. 25, 2021.
Source: https://www.thebalancemoney.com/will-millennials-have-social-security-4122550
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