- Millennials need Social Security the most, but a recent Treasury report anticipates it will run out in 2034.
- They don’t have pensions and have faced numerous economic struggles that make saving difficult.
- Many millennials who have retirement funds dipped into them during the pandemic.
The economy is hitting millennials in the face yet again.
Social Security is set to run out of funds for full payments a year earlier than anticipated, in 2034, according to a new report from the US Treasury Department. It blamed the pandemic and related recession for moving up the date that full payments will cease.
In 2021, the estimated average monthly payment is $1,543 a month, according to the AARP. Not having that income is a problem for all American workers, but an even bigger problem for millennials. William Arnone, the CEO of the National Academy of Social Insurance, recently said on Yahoo Finance Live that the generation needs Social Security the most.
“Millennials, in particular, will need Social Security because they’re missing something their parents or grandparents had and that was a good, old-fashioned traditional pension,” he said. “They’re in jobs that don’t have pensions — they have 401(k)s. They’re going to need Social Security more than any other generation.”
It hasn’t helped that millennials have faced one financial challenge after another. They’ve shouldered the burden of two recessions before the age of 40, astronomical student-loan debt, and soaring living costs for things like healthcare and housing.
It’s all set them back on retirement planning: Half of millennials don’t have a retirement account, according to an Insider and Morning Consult survey from 2019, with the majority saying it’s because they didn’t have enough money to save.
The pandemic hasn’t helped matters. While it enabled one small cohort fortunate enough to retain their jobs save more money, it hurt many others who’ve had to make an early retirement withdrawal to cope with the economic fallout. According to a survey released in August by the TransAmerica Center for Retirement Studies (TACR), 44% of millennials said they’ve dipped into their retirement savings during the pandemic.
A dwindling Social Security fund is just the latest economic roadblock at a time when millennials need it the most.
Millennials aren’t counting on social security
Demographic changes, like people living longer and having fewer babies, have made the prospect of Social Security going bankrupt a point of concern for years.
Even before the Treasury’s recent report, millennials were worried Social Security wouldn’t exist when they retire. Most expected their primary source of retirement income to be self-funded through retirement accounts or other investments and savings, per the TACR report, with 77% concerned Social Security would run out of funds before their golden years.
But Social Security won’t go fully broke in 2034. The treasury’s projections, which reflects their “best estimates” of the pandemic’s impact, anticipates that the fund will run out of its current surplus and rely on what’s brought in from taxes if no action is taken to shore up the fund by then. That means Social Security would fund 78% of benefits instead of 100% of benefits.
There’s also precedent for Congressional action to replenish Social Security and its funding mechanism. In 1983, President Ronald Reagan worked alongside a bipartisan Congressional commission to pass a plan to reform the program’s funding and structure. Today, Treasury Secretary Janet L. Yellen recently said that the Biden administration is committed to safeguarding the program.
“The bottom line is: Something must be done, and the recommendation every year for the past five years has been [that] the longer we wait, the more difficult the action becomes,” Arnone said.
The sooner Congress acts, the better, or millennials will find themselves with another wrench thrown into their future plans.