Millennials Want Big Social Security Changes. Will They Get Them?

Young adults don't think Social Security can survive in its current form. Is an intergenerational fight coming?

Aug 9, 2014 at 6:30PM

Millennials Wikimedia Gphgrd
Source: Wikimedia Commons user Gphgrd01.

For almost 75 years, Social Security has paid regular monthly benefits funded by taxes collected by the program. Through the years, tax rates have increased to help provide the money necessary to pay an increasing number of Social Security recipients, but the basic structure of the program has remained much the same.

Yet amid the latest set of dour projections for Social Security, one demographic has begun to voice its own opinions about the program. It will be decades before millennials can claim retirement benefits under Social Security, but they have strong opinions about the future of the program and what must happen to ensure its survival. Some of those opinions call for major changes to Social Security as we know it, and the impact of those proposals on retirees and those close to retirement could lead to an intergenerational conflict about the program.

What millennials think about Social Security
The Reason Foundation and the Arthur N. Rupe Foundation recently studied the opinions of millennials aged 18 to 29 on a number of issues, and many of the respondents expressed significant concerns about Social Security's future. More than half of millennials surveyed said Social Security was unlikely to exist at all by the time they reach full retirement age, with only 45% believing the program will still be there when they need it.

Millennials Flickr Itupictures
Source: Flickr user itupictures.

Moreover, even among those who think Social Security will survive over the next 40 to 50 years, few believe the program will provide the benefits it pays to current retirees. Only about a third of millennials think they'll receive the same benefits Social Security pays now, while 64% express a lack of confidence about future payout levels.

A controversial proposed fix: private accounts
Millennials aren't alone in their doubts about the financial viability of the Social Security system over the long run, with the most recent Social Security Trustees Report stating that the program has less than 20 years left in which recipients can expect full benefits when they retire. The Trustees Report focused on working within the system to improve Social Security's financial condition, with measures including further increases in payroll taxes and various changes to future benefit calculations. Meanwhile, millennials favor more substantial changes to Social Security, including a controversial proposal to adopt private accounts for investing money that currently goes toward Social Security payroll taxes.

Millennials Flickr Itupictures
Source:  Flickr user itupictures.

Specifically, almost three-quarters of millennials surveyed believe Social Security should be changed to allow younger workers to use private accounts to invest the money they currently pay in Social Security taxes. By doing so, millennials hope to realize better returns than they'd receive under the existing system, all while ensuring that future changes to Social Security don't shortchange them based on the taxes they've paid.

Obviously, shifting money from the current Social Security system to private accounts would impact today's retirees, as a reduction in tax revenue going toward paying current benefits would lead to a much faster depletion of Social Security Trust Fund reserves. Yet even after the survey explicitly asked millennials about their views in light of the negative impact it would have on traditional Social Security benefits for current and future retirees, more than half still said they'd support private accounts.

Do-it-yourself Social Security
The topic of private accounts has been the subject of intense political debate, and a solution that reduces benefits for current retirees seems very unlikely to be approved. Without a major shift in political power, therefore, millennials aren't likely to get the changes to Social Security that they seek. The lesson that many millennials are learning here is that even as they continue to pay Social Security payroll taxes, they also need to set up their own private investing accounts to provide for their own future.

Unfortunately, millennials aren't generally the most comfortable with investments. According to a UBS survey, millennials have more than half their assets in cash, with just over a quarter invested in stocks. Interest rates are currently so low that cash accounts are gradually losing purchasing power to inflation, so millennials need to adjust their investing strategy if they want to make the most of their retirement savings.

In the meantime, though, people of all ages should expect continued tension between older and younger generations as the Social Security situation evolves. So long as the program remains financially endangered, Social Security will be a source of uncertainty for everyone who expects to receive benefits from it sooner or later.

How to get even more income during retirement
Social Security plays a key role in your financial security, but it's not the only way to boost your retirement income. In our brand-new free report, our retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was rated #1 in the world by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations moments ago. Together, they've tripled the stock market's return over 12+ years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

Click here to be among the first people to hear about David and Tom's newest stock recommendations.

*"Look Who's on Top Now" appeared in The Wall Street Journal which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.

Compare Brokers