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Will social security be there for millennials? – The Motley fool



There is a lot of uncertainty about the future of social security, so much so that countless Americans are wondering if the program is going bankrupt. And while this is a problem for current and near-retired people, it also puts younger workers in a difficult position.

And do not make a mistake: the millennials are by no means confident that social security can support them future. In a recent Gallup poll, 33% of Millennials said they feared that the benefits to them would be unavailable when they retired. The question is: are you right?

  Four young adults, two men and two women, are smiling arm in arm outdoors.

The precarious future of social security

It's easy to see why so many Americans worry about social security. The program faces a multi-billion dollar deficit that could impact performance if Congress fails to come up with a solution. But while the Trustee's latest report is not exactly a glorious picture for social security, the news is not all gloomy.

At the moment, the worst-case scenario for social security looks like this: If legislators do not do that If not intervened, the program will use its trust funds by 2034, and at this point it will be no different Choose to cut the planned benefits by up to 21%. This means that future beneficiaries, including millennials, will receive lower payments than they would normally receive.

After all, 79% of the planned benefits are much better than no benefits at all, and that's exactly what we're looking at now. Remember, social security gets its payroll taxation – as with the taxes we like to complain about, but also serve the very important purpose of keeping the program afloat. As long as we maintain this practice, we will get money into the system, which means Millennials will have some social security income that they can look forward to in the future.

Limited Social Security Purchasing Power

19659006] While it does not appear that Social Security will go away, younger workers should not make the mistake of relying on these benefits in any way, shape or form. Even at best-that is, no reduction of 21%, as mentioned above-Social Security should replace only about 40% of the employee's average early retirement income. However, most seniors need about twice to live comfortably. In addition, social security will replace an even lower percentage of income for higher earners, which means that anyone who does well in his or her career will need even less to benefit.

Not only that, but at least social security years have made it very bad to keep up with the spending needs of seniors. Although the program aims to provide beneficiaries with cost-of-living adjustments (COLAs) to maintain their purchasing power in the face of inflation, the recent COLAs were far from generous. In addition, they are often devoured by Medicare premium increases.

All this means one thing: Regardless of what happens to social security in the future, it is up to us, as workers, to save independently for our golden years, that includes millennials. But considering that only 38% of younger workers save for retirement, the overall picture for millennials does not look promising at the moment.

However, the good news is that Millennials, regardless of their current earnings or savings rate, are an extremely powerful weapon in their arsenal: time. This means that those who start saving immediately have a solid opportunity to accumulate wealth and buy the option of completely forgetting social security.

Look at the following table, which shows how much wealth a millennium has at the age of 40. Savings window could accumulate:

Monthly savings amount

Total accumulation over 40 years
(assuming an average annual return of 7 %)

$ 200

$ 479,000

$ 300

$ 719,000

$ 400

$ 958,000

$ 500

$ 1.19 million

$ 600

$ 1.43 million

AUTHOR'S CALCULATIONS

Note that these figures require an average annual return of 7%, which is more than feasible with a stock-focused portfolio. Younger workers are indeed able to stock up, as they have time to overcome the ups and downs of the market.

While social security is likely to be there for millennials, getting a retired job is unlikely to be a great job. The sooner younger workers balance out their austerity efforts, the less they have to take care of it.


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