New estimates show that millennials, who are under the age of 26, are expected to have worse federal retirement benefits than their parents and grandparents, especially if they are going to be depending on Social Security for their retirement.
The Social Security Administration published in a recent report that for many programs they would only be paying for a portion of the benefits that retirees might have been used to after 2035. This can be avoided if policymakers start making effective changes to the current system.
According to this information younger people will need to start looking at different avenues in order to supplement their post-retirement income.
The Social Security Board of Trustees usually releases an annual update on the financial status of the Social Security trust funds. The reports published in the previous years have been showing that many of the invested contributions and funds are quickly drying up. This year’s report also shows that the Social Security Administration (SSA) will only be able to fulfil around 80% of the benefits it had originally promised unless Congress takes action. This action can come both in the form of additional taxation as well as in the decision that benefits will be lowered.
This means that if there is a reduction of benefits by 20%, an average person in their mid-30s earning around $50,000 will lose around $13,500 in annual Social Security income. Overall, if they live for another 30 years or so they will end up losing around $365,000 over their period of retirement.
It is important to remember that while Social Security is meant to help replace part of your earnings during retirement it is not meant to cover your entire retirement needs.