Over the next 20 years, the working age population is supposed to increase by 10 percent, but the population aged 65 and over will increase by almost 80 percent.… Millennials will be faced with higher taxes and a weaker economy, which will make it more difficult for them to set aside money for retirement.… [They] cannot count on the same kind of benefits that baby boomers are receiving now, because the programs—Medicare and Social Security—are unsustainable [and will] bankrupt the nation if they aren’t changed.
Programs that benefit today’s retirees—Social Security and Medicare—will most likely not exist in their current form by the time Generation X and Millennials become eligible for benefits.
Current incoming retirees are not as prepared as they should be. A remarkable 75 percent of Americans nearing retirement had balances of $30,000 or less in their retirement accounts in 2010. One encouraging factor is that younger generations appear to be saving more responsibly than those now approaching retirement did.
But a Financial Finesse study found that members of Generation X are “more vulnerable” than today’s near-retirees because “they are set to retire just as Social Security is expected to run out of money.”
The possibility of a bankrupt Social Security is much more imminent than it seems. Social Security deficits already run in the billions of dollars and will grow rapidly as the baby boomers continue to retire and the workforce can’t keep pace. These demographic realities—in addition to burgeoning government spending and exploding debt—promise to hamstring economic growth and younger generations’ shot at the American Dream.
Social Security’s mounting deficits are estimated to cause its trust fund to run completely dry by 2033. At this point, payroll taxes will only be able to finance 77 percent of benefits, amounting to an automatic 23 percent across-the-board benefit cut. Without reform to the program, younger generations could get hit with yet higher payroll taxes to shield beneficiaries from these indiscriminate cuts.
Echoing Boccia, the Financial Finesse report states that “Millennials need to take a more long-term look at their finances because they won’t have defined benefit pension plans or Social Security available to them when they retire.”
So what should future retirees do now? On a national level, they should make their voices heard so Congress makes the necessary reforms to Social Security to ensure its future solvency and affordability. On a personal level, Boccia suggests to boost personal savings.
Taking steps to plan for retirement today is vital, because young Americans cannot count on Social Security to provide them with the same benefits it bestows on retirees today.