Young Americans are worried that Social Security may be gone. A recent Nerdwallet survey found that around 36% of Americans under the age of 65 do not believe that they will have access to valuable social safety nets by the time they leave.
It’s not hard to believe that once trusted retirement income sources are heading towards the roadside. The defined benefit pension scheme was once ubiquitous, but almost everything disappeared. Just 8% of workers aged 18 to 29 were one in 2023, according to the Federal Reserve.
The headlines on social security are equally ominous. Each year, the Social Security Administration warns the public that the trust funds were being used to pay retirement benefits, which is heading for drainage. The latest estimate released in June predicts the fund will run out in 2033, at which point Uncle Sam can pay the beneficiaries.
Experts say the date may come sooner. According to estimates from Social Security Chief Actuary Karen Glenn, the tax cuts on President Donald Trump’s budget bill, passed July 4, will be passed on July 4, bringing an estimated drying date until the end of 2032.
In other words, if Congress doesn’t act, Social Security can quickly go down, but not extinction.
“That’s an important nuance,” says Sam Taube, investment writer and spokesman for Nerdwallet. “We don’t see a scenario where the program will disappear at the moment. But there’s quite a bit of haircut at this point.”
What to expect from social security?
It’s a simple reminder of how Social Security works. Workers will pay Social Security taxes via payroll deductions on revenues up to $176,100 in 2025. Both you and your employer put money into the program to match 6.2% of your income. The money goes into trust funds where the government pays benefits to retirees, survivors and eligible people with disabilities.
You will receive payment upon retirement. The amount depends on when you request benefits and the amount you earn during your year of work. The program is intended to be a safety net for retired Americans, but it is not their sole source of income. According to the Social Security Administration, profits are designed to replace roughly 40% of pre-retirement revenue.
Catherine Collinson, president and CEO of the non-profit Transamerica Institute, said that given the low financial resources, something has to be given over the next few years.
“Simply put, they need to change the benefits ceremony,” she says. “They were able to raise payroll taxes. They can also raise the full retirement age. They are now 67, which is one of the oldest in the world.”
Alternatively, if Congress fails to act completely, the beneficiaries can see a total decline in payments. To prepare for these possibilities, financial professionals recommend taking several steps.
1. Get a Social Security Statement
Even if you’re years away from retirement, you can still sign up for an account on the Social Security Administration website and download the latest statements. The government estimates your payments using a formula that takes into account the average of your payments (part of your pre-retirement income) from your highest earned 35 calendar years.
Your statement indicates your estimated monthly payments. It also shows the difference in your interests depending on when you claim it: for workers born after 1960, full profits begin at the age of 67. Waiting until you’re 70 will give you 8% bumps per year.
“It really helps to know where your overall profit stands,” Collinson says. Understanding the rough dollar amounts you can expect to receive at retirement will help you plan future changes to your profits, she adds.
2. Do backward math and plan the worst
Knowing the rough amount of your Social Security benefits when things are standing up can help you figure out if you are on track to achieve the lifestyle you want to retire. The general rule is that if you have a properly diversified portfolio, you can afford to retire about 4% per year without running out of money.
Run your current retirement portfolio via a compound interest calculator to see how much money you have before you quit your job. Multiply by 0.04 to find the annual withdrawal amount. Now add your Social Security benefits. Does that seem enough to live? If so, you might be in the form of OK. If not, it’s worth considering ways to enhance your savings.
If you want to go beyond napkin mathematics, working with a financial advisor can help you get a more comprehensive picture of what your finances will look like in the future. Financial professionals can also introduce scenarios where Social Security gets a haircut, or events where it is unlikely to disappear completely.
“In decision analysis, we look at worst-case scenarios, best-case scenarios, average-planning scenarios,” says Phillip Battin, president and CEO of Ambassador Wealth Management. “The American mind always wants to build on best-case scenarios, which is called idealistic or utopian thinking, and clearly brings us into trouble.”
Planning other downside scenarios, such as a reduction in social security or an unfair slowdown in the market, could provide financial security and provide cash bonuses if things go well, he says.
“It comes down to planning for every scenario,” he says. “That is the only way to have true peace of mind.”
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