Worried about Social Security, Millennials must get creative
By Mark Henry
Social Security Day is Aug. 14, marking that day in 1935 when the Social Security Act was signed into law. More than eight decades later, Millennials wonder whether that celebrated social safety net will still be around to help when they reach retirement.
Most are skeptical. Eighty percent of millennial workers say they’re worried that Social Security won’t be there for them, according to a 2017 study by the Transamerica Center for Retirement Studies, which counts Millennials as those born from 1979 to 2000.
The system is projected to be able to pay only 75 percent of benefits starting in 2035, when the Social Security trust fund will deplete its reserves, according to estimates by the Social Security Administration.
Millennials face unique concerns for saving for retirement. Previous generations could rely on company pension plans, which are declining in number, and Social Security, which is experiencing deficits that threaten its future existence.
Whether you’re a Millennial or the parent of one, it’s important to know how the uncertainty about Social Security makes overall retirement planning even more important.
Millennials should consider four factors about retirement while facing uncertainty about their future Social Security checks.
One check, not two
Social Security can be a comfort to an aging couple, but when one passes away, the income drop-off can be significant without other revenue sources available. Make sure both you and your spouse are protected. Social Security figures significantly in the equation here. Remember that your surviving spouse will only get the highest of your two Social Security checks, not both checks.
Longer life expectancy
Increased longevity statistics magnify the importance of having more financial sustainability in retirement. Chances are that the vast majority of Millennials will live into or past their mid-80s. Make sure that your retirement plan takes longevity into account so that you don’t run out of money.
Healthcare costs
Surprisingly to some, Medicare is not free; premiums for coverage are usually deducted from your Social Security check. Standard Medicare doesn’t cover dental, hearing, or vision; is subject to deductibles; and doesn’t cover long-term care. Fidelity’s latest estimate is that it will cost $275,000 on average per couple for out-of-pocket healthcare costs in retirement.
Think long term with savings, investments
This means to do all you can to accumulate all you can by starting early and being consistent with savings and investments. Millennials, especially those with well paying jobs, are wise to save a good chunk of their salary early — 10 to 15 percent. The money they invest early will fund a nice nest egg. Take advantage of tax-advantaged accounts like IRAs, 401(k)s, and company matches.
Millennials just don’t have as much of a safety net as their parents or grandparents did. They need to be in the know, tailor their financial habits, and plans accordingly to provide a financial foundation they otherwise might not have in the future.
Mark Henry is a certified estate planner and founder/CEO of Alloy Wealth Management.
Articles related to “Worried about Social Security, Millennials must get creative”
Just in time for Christmas, Millennials are ditching religion
Financial advice for millennials: Avoid mortgages and college debt and start saving now
Three ways Millennials can help their baby boomer parents get fit
