What will Social Security look like by the time you retire? Many Americans have lost hope that it will still be there. According to a 2019 Gallup poll, 41% of individuals surveyed said they worry a great deal about the Social Security system. The same survey also revealed that 33% of individuals said they believe Social Security is going to be a major source of their income in retirement.

So, what will Social Security realistically look like in the future? Should workers be concerned?

Key Takeaways

  • Social Security does not now—and is unlikely in the future to—provide enough income for a comfortable retirement.
  • If the program is reworked by Congress in order to extend its life, younger workers and high-earning people are likely to be the ones who will pay for it.
  • You should start saving for your retirement as early as possible by contributing to retirement accounts such as an IRA or 401(k).

The Future of Social Security

Social Security may look drastically different in the next few decades, especially since the Social Security Administration's 2019 Trustees Report estimates the funds will be depleted in 2035, based on the current law, which means that it will have no cash reserves and will only be able to pay out what it takes in on an annual basis. That is one year later than last year’s estimates; some financial analysts predict the reserves could run out even sooner.

Social Security is a pay-as-you-go program. Earlier generations relied on decades of contributions from the huge baby boomer generation, which provided year after year of surpluses to the Social Security trust funds. Now, as the boomers retire, younger generations make up a smaller percentage of the workforce than in the past, creating a short fall in funding.

Clearly, changes must be made. Many have speculated on what those changes will be. The most likely course of action is that benefits will be reduced and the age of retirement will be raised.

The Social Security Administration estimates as of 2019 that the program as currently constituted will run out of its cash reserves in 2035.

Who Will Be Affected the Most?

Younger workers and individuals who earn more may be hit the hardest. These two groups contribute the most to the fund and could end up reaping the fewest benefits. However, even if the funds were to be “depleted,” the Social Security Administration noted, “At the time of depletion of these combined reserves, continuing income to the combined trust funds would be sufficient to pay 80 percent of scheduled benefits.” Later, it adds that “by 2093, continuing income equals about 75 percent of the program cost.”

That said, if you are planning to retire in the upcoming decade, it is important to use the time you have left wisely. Boost your retirement savings as much as possible while also paying down debt and keeping expenditures low. Social Security payments alone will not cover an average mortgage or living expenses when you are saddled with debt.

Social Security Is Not Enough for Retirement

Even if Social Security gets a huge makeover from Congress, workers should not consider the program as a sufficient retirement plan. Even now, Social Security barely covers living expenses for retired individuals.

According to the Social Security Administration, in 2019 it will pay 64 million Americans around $1 trillion in combined benefits. This might seem like a lot, but break down those numbers and in 2019 retired individuals are earning $1,461 per month, on average, and disabled individuals are earning $1,234 per month. Individuals who exist on Social Security benefits alone don't live far above the poverty line, which is roughly $1,041 a month for a single person in 2019.

If your employer-sponsored retirement plan offers matching employer contributions, be sure to contribute enough to take advantage of them; don’t turn down free money.

The Anti–Social Security Retirement Plan

So what can an individual do when retirement is 20, 30, or even 40 years away? The best plan is to start saving now. Take advantage of the time you have and save as much as you can in your 401(k) and/or individual retirement accounts (IRAs), traditional or Roth. Be sure to contribute enough to get your employer’s full match, even if it is a small percentage. Otherwise, you’re throwing away free money. If your company does not currently offer retirement matching, you should still contribute to your retirement account and keep your eye out for positions that offer a better benefits package.

As early as your 20s, you should make every effort to save for retirement—even if you feel you cannot afford it or you’re not in your dream job. If possible, have retirement savings taken out automatically before you receive your paycheck. This way, you won’t miss the money. Another option is to learn to live off of 98% of your paycheck and invest the other 2%, then gradually increase the percentage each month while cutting back on spending.

The Bottom Line

Many people worry whether Social Security will be available when they retire. Even if Congress tweaks the policy to extend the life of the program, it is likely there will be a higher retirement age and fewer benefits. It is best for individuals to secure other retirement savings and not plan to rely on Social Security benefits. That's not a good idea now and won't be in the future.