If you're a millennial, should you expect to receive Social Security someday? Nearly half of the generation born between 1981 and 1996 strongly or somewhat agree with the statement that they "won't get a dime" from Social Security benefits, according to a 2022 report by HealthView Services.
The pessimism is understandable, given recent projections. Social Security's retirement trust fund is expected to be drained by 2033, according to the latest trustee's report.
But if you're a millennial, the picture isn't quite as bleak as it sounds. Here are four things every millennial should know about the future of Social Security.
1. You can still count on getting Social Security
The claims that Social Security is going broke aren't quite correct. It's true that unless Congress acts before 2033, Social Security's retirement trust will run out of money. But Social Security is a pay-as-you-go program. It's funded by the 6.2% Social Security payroll tax that both you and your employer pay up to an annual wage cap ($160,200 in 2023).
As long as people continue to work and pay payroll taxes, Social Security will still be around. But if the trust is depleted in 2033 as projected, payroll taxes would only cover 77% of scheduled benefits.
Translation: If you're a millennial, you don't need to worry that Social Security will disappear before you retire. But it is prudent to prepare for the worst-case scenario, which is that you may only receive 77% of the benefit you've been promised.
2. Don't expect your benefit to cover your retirement costs
Millennials have a lot less retirement security compared to their parents and grandparents. That isn't just due to Social Security solvency concerns. Because pensions have largely been replaced by defined-contribution plans, like 401(k)s, younger workers' retirement income hinges on their investment decisions.
But there's even more bad news: Social Security benefits continue to lose purchasing power because cost-of-living adjustments haven't kept pace with retirees' actual costs. A senior household spends a higher percentage of its income on medical expenses and housing compared to a working-age household, and those costs typically rise faster than overall inflation. The Senior Citizens League estimates that the average Social Security check would buy about 40% less in 2022 than in 2000.
What does that mean if you're a millennial? Whatever Social Security you do receive today is unlikely to stretch as far as it did for your parents and grandparents. Saving for retirement is even more essential if you're a millennial or Gen Zer.
3. You can still increase your Social Security check
If you're worried about a reduction in benefits or the continuing loss of Social Security purchasing power, you have options to increase your future checks. One good strategy is to plan on delaying as long as possible. Though you can take retirement benefits at 62, you won't be eligible for your full benefit until you're 67 -- which is the full retirement age for anyone born in 1960 or later.
Delaying even longer can maximize your Social Security. You earn 8% delayed retirement credits for each year you wait past full retirement age until you celebrate your 70th birthday.
4. Look to history for comfort
You may think the future of Social Security looks grim. So perhaps it will be of some comfort to know that this isn't the first time Social Security was at risk of burning through its reserves.
Social Security is nine years away from depleting its trust. When the last major Social Security reform passed in 1983, reserves were just a few months away from running dry.
Congress passed a number of changes. They gradually increased both the payroll tax rate and full retirement age and also started taxing a portion of retirees' Social Security. There are plenty of actions Congress could take in the coming years, including eliminating the wage cap for high earners and increasing payroll taxes and full retirement age again.
If you're a millennial, perhaps the most prudent course is to plan for retirement under the assumption that Congress does nothing and you'll get a smaller benefit. But given that Congress still has nine years to act and that Social Security is a hugely popular program, odds that representatives will take steps to preserve benefits for future generations are high.