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What You Need To Know About Social Security If You're Gen Z or Millennial
The Social Security trust funds are projected to run dry by 2035. If no action is taken to address the issue, benefits could be cut by 17%, meaning younger generations may have less financial support in retirement. Learn More: Try This: Relying solely on Social Security is risky due to its uncertain future. Millennials and Gen Z must take charge now and start planning for retirement. Here's what these generations need to know about Social Security, the challenges ahead and how to prepare for changes. Many young people assume they don't need to worry about Social Security for years, but the truth is, they're already paying into the system with every paycheck. Discover More: Social Security is an accrual system — today's workers finance current retirees and future workers will fund today's employees once they retire. The cycle continues as long as the system remains sustainable. According to Leon Turkin, a financial advisor and owner of Turkin Mortgage, 'The program is having some hard times financially, but it is not going to be wiped out. If the Social Security trust fund were to become empty, benefits would still have to be paid largely by payroll taxes. The government will probably intervene by raising the retirement age or adjusting tax rules to extend the program's longevity.' Even though claiming Social Security benefits may seem far off, the program is already shaping the financial future of younger generations. However, maintaining the system's sustainability is crucial to ensure future generations continue to receive benefits. Financial security is necessary for every generation, but experts warn that Social Security's future remains uncertain, especially for millennials and Gen Z. Charlie Hughes, CEO of ContractorNerd, said it bluntly: 'Millennials and Gen Z can't assume they'll receive the same benefits as today's retirees. Planning for alternative sources of retirement income is essential. Times are changing and policies may not always be favorable.' The two generational groups must take proactive steps to secure their financial futures. Because policies change over time, early investment is historically the best way to ensure long-term stability. A solid financial future requires careful planning, time and income diversification. These factors are key to securing better retirement benefits, particularly for younger generations. Social Security alone won't be enough to ensure a comfortable retirement. The average monthly benefit is currently around $2,000 — not nearly enough to maintain a high standard of living in most cities. Turkin stressed the importance of having a backup plan: 'To secure a good standard of living, you need a second pillar of savings: personal investments, pensions, retirement accounts like a 401(k) or IRA. Being solely dependent on Social Security will lead to financial hardship, so I always encourage a diversified retirement plan.' Hughes agreed: 'Pairing Social Security with savings and investments is crucial for securing your financial future. Begin saving consistently and stay informed about possible policy changes. Remember the saying, 'prevention is better than cure.' It's always wise to plan ahead for peace of mind.' Diversifying income sources is an essential strategy for millennials and Gen Z. A strong retirement portfolio helps ensure financial security, increases investment opportunities and reduces dependency on Social Security alone. By investing early and diversifying their incomes, younger generations can better prepare for an uncertain future. Relying on a single income source is risky, as financial conditions and policies can shift unexpectedly. More From GOBankingRates This article originally appeared on What You Need To Know About Social Security If You're Gen Z or Millennial Sign in to access your portfolio
