When you're in your 20s and 30s, Social Security is probably not something you're likely thinking about. At that point, you're decades away from being eligible for benefits. Also, you may be more focused on near-term goals -- things like buying a house, paying off credit cards, and making your next career move.
But actually, it's really important to read up on Social Security well ahead of retirement. And there's one specific aspect of the program it pays to know about sooner rather than later.
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Know how much replacement income to expect
There are plenty of seniors today who get all or most of their income from Social Security. But people in that boat don't tend to be the most financially comfortable. Quite the contrary -- a lot of seniors who live mostly on Social Security have to pinch pennies and make hard sacrifices to cover their living costs.
One thing you may not realize about Social Security is that it won't replace your pre-retirement income in full -- not even close. As of now, you might get somewhere in the ballpark of 40% of your pre-retirement paycheck out of your monthly benefits. But that percentage could shift for the worse if Social Security is forced to implement broad cuts.
Even if benefits aren't broadly reduced, think very carefully about what it might mean to have to live on just 40% of what you earn today. Would you be able to put a roof over your head and buy food? Would you have any money left over to pay for leisure things like streaming content and social outings? Would you be forced to sit in a cold house every day because you can't afford to pump up the heat?
These aren't pleasant things to think about. But if you don't build up some savings to bring with you into retirement, they may end up becoming your reality.
The motivation you need to save
There's no reason to write off Social Security for your retirement because even though benefit cuts are on the table, the program isn't about to go away completely. But even so, living on 40% of your pre-retirement paycheck could make for a pretty miserable existence. The sooner you know that, the sooner you might begin funding a retirement plan.
If you're in your 20s or 30s and this is the first time you're hearing what little replacement income Social Security is likely to provide for you, tell your friends, neighbors, and anyone else your age who might similarly be in the dark. It's understandable to not know much about Social Security when retirement is really far off, but you don't want to let that innocent lack of knowledge become a financial problem for you later in life.
Remember, too, that the sooner you start saving for retirement, the more time you'll give your investments to grow. Even if you don't have much cash to part with now, any contribution you make to an IRA or 401(k) has the potential to gain a lot of value over time.
