Updated on 09.14.07

Predicting the Future: Will People In Their Twenties Today Collect Social Security In Retirement? And How Should That Answer Change Our Plans?

Trent Hamm

One common question I get from people fresh into the workforce and setting up their new 401(k)s is this: how much retirement income should I count on from Social Security? It’s not an easy question to answer because we don’t know what the political future of the United States holds.

We do know one thing: at some point in the future, the exact date depending on how you calculate things, Social Security as it is currently set up and funded will run out of money. That’s simply a fact of basic arithmetic, and most estimates of that “out of money” date put it well before people in their twenties will collect a dime of benefits.

So, in order for people in their twenties to get Social Security benefits, something will have to change. What will the change be? At this point, it’s impossible to really tell. Possibilities include individuals opting out of Social Security, a bailout from other taxes collected by the federal government, or some sort of ending of the program.

Regardless of what might happen to Social Security, I don’t view it as a safe bet that Social Security benefits, as they are today, will be around for us in forty years. In other words, when you’re calculating your retirement savings, don’t include Social Security Instead, view them as a bonus if you happen to receive benefits in your dotage.

So what should you do instead? When you decide to calculate how much you need for retirement (here’s how I calculate it), don’t include any Social Security at all – essentially pretend it doesn’t exist. This way, no matter what happens to the program, you’re covered, and if the program is still ongoing in Generation Y’s dotage, then it can be considered frosting on the cake.

This might be uncomfortable advice to some, who might have been putting away a bit less and assuming that Social Security will make up the difference. In my view, you’re making a wager that the government will bail out Social Security. If that’s a risk you feel comfortable with, then you’re making the right choice. Personally, I don’t feel comfortable with it and thus I’m planning for a retirement without Social Security.

Hopefully, a retirement with a lot of grandchildren around.

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  1. dong says:

    While I definitely think we will have social security as we do today, there should still be benefits. I believe the numbers say that when the “trust fund” is tapped out social security will still pay something like 70%. In actuality that will be lower given longer life expectancies. But it could also be higher if we open immigration policy. Either way there should be something, just something less. If anything we should be more worried about medicare as health care costs rise…

  2. Dave says:

    Not to get all political… but social security will not run out of money. The SS Trust will run out of money, but benefits can still be paid out by people currently paying taxes. Without raising taxes, it will be something like 70% of the current benefit (as dong already mentioned).

  3. Trent is bang on the spot! We had done a lot of research on this aspect and we feel that social security won’t be around when we retire. According to the data we got from the official site for Social Security Cash Flow, the game will be over by 2041. The details are covered here (http://firefinance.blogspot.com/2006/04/arfs-introduction-oh-my-secured-social.html).
    Thanks Trent for corroborating our views.

  4. the baglady says:

    The government borrows from the Social Security Trust all the time, and is already depending mostly on the current tax payers to fund benefits. Considering how expensive child rearing is I think the birthrate is going to go down even further. Actually right now America’s population growth is dependent on immigrants. So if in forty years America is no longer a country worth moving to, then the immigration growth will die down too. Then Social Security is really screwed.

  5. Margaret says:

    This was a big brou-ha-ha in Canada many many years ago. Employer contributions got raised, the way the funds were invested were changed and basically, we are now covered at least until something like 2070. Your system is in trouble, but it can be fixed. Good luck.

  6. eROCK says:

    I don’t know about anyone else, but I contributed 100% of the amount required by law so I should receive the payout in its entirety as it is today.

    70% is not OK, neither is 80%, 90%, or even 99%, I want my full SS.

    Alternatively, I’d prefer to opt-out of the program … seeing as though if I had invested my money in a diversified portfolio rather than let it sit idle in the gov’t purse, I would be much better off.

    On to Trent’s point, I certainly don’t expect SS to payout … although some may wish to consider an increase in SS tax that could come down the line if the gov’t wishes to keep the full payout and not subsidize it to 70% or something similar.

    IMHO, give the people the option to opt-out! As Ronald Reagan once said “Government exists to protect us from each other. Where government has gone beyond its limits is in deciding to protect us from ourselves.”

  7. MS says:


    SS will be around pretty much forever. The Senior Citizen voters are too influential to let it go.

    Retirement age will increase a little more, maybe to 69, to be implemented some time after the current AARP crowd is all safely over that age.

    The employer part of the contribution will be raised enough to keep SS limping along. While the cost will be passed on to the employee through suppressed salaries, calling it a tax on the employers will allow it to be politically viable.

  8. Ms. M&P says:

    I agree with MS–I think it will stick around because of the voting block. I do think it will change and the qualifying age will rise to 70 or so. Congress could also consider eliminating it for people who have enough saved up and only paying it out to those with no income (not the best option for lots of reasons, but it would keep the program longer). Maybe SS will be privatized like Bush wants…who knows, but I think we’ll have it in some form.

    What about Medicare? That’s a lot more valuable to us in our future than SS and it’s scheduled to run out of money twice as quickly as SS.

  9. Brian says:

    I agree that social security cannot be counted on. I have the feeling that at some point the government will say that anybody who has worked hard and saved is well enough off and then not eligible any social security benefits.

  10. Dave says:

    eROCK: ironically, you say that you would accept no less than a full 100% payout; but you wish to opt out yourself, which would deprive people who have been paying in for years from their full 100% payout.
    Sadly, there is no easy answer.

  11. Kat says:

    Being self employed, I loathe the day I would have to pay more for a benefit I won’t receive.
    I would rather not pay anything into SS and be allowed to invest that money where I see fit, such as a Roth IRA.
    The idea of SS was set in a time that isn’t working today and it needs to go away completely.

  12. Will says:

    Everyone has good valid points, however no one stated a reasonable solution to the current problem.

    The problem is that the SS program is losing more money than it is receiving, and that one day, there will be no money left to pass out.

    If the program is stopped, then all those senior citizines who paid thier share gets screwed.

    If the program continues, then the problem gets pushed down to the next generation, and the generation after that until it is unfixable like today.

    There is no PERFECT solution to the SS problem, no way to pay everyone their fair share when it is their turn.

  13. Brad says:

    “The idea of SS was set in a time that isn’t working today and it needs to go away completely.”

    Tell that to the physically and mentally-impaired who make use of it earlier in life than planned. My uncle (in his early 50’s) was schizophrenic, and he lived off of SS because he was unable to work. There has to be a safety net for people like that.
    While I would rather invest the money myself, we also have to look after the less fortunate in society. Our country has been fed this idea that all taxes are unnecessary, which is why our infrastructure is in shambles.

  14. Mrs. Micah says:

    I look at it as a perk. Hopefully it will still be around, but I’m not making any plans because I have no idea what it’ll be like.

    All we really have right now is speculations and predictions, but it’s 40 years down the road. I’ll pay more and more attention as we get closer, (I’m only 22 now, so it’s 43 years down at least) and figure out how the benefits predicted then will fit into my financial plan.

  15. Brad says:

    “The idea of SS was set in a time that isn’t working today and it needs to go away completely.”

    before America was a giant strip-mall.

  16. delpantano says:

    I have no idea, in specific terms, what to expect from SS, but I long ago decided that I don’t have the energy to care, either. So I totally disregard it in terms of my own planning for the future (savings and insurance). If it’s still alive and kicking in 40 years, all the better; if not, I’ll just be in the position I had planned for anyway, all other things being equal.

    It never really occurred to me to regard SS as anything other than a tax we pay to live in a society where old people don’t starve to death (to put it crudely). And I really don’t mean that in a cynical way – I think that’s a realistic description of the purpose it serves in the context of my generation’s place in time (I think Trent and I are the same age). My grandparents (and to some extent my boomer parents as well) don’t understand how I can make a statement like that with no angst behind it, but I write off that disconnect as good old-fashioned generation culture gap.

  17. In ten years it is expected that Social Security Trust Fund will pay out more in benefits than it will take in FICA taxes. By 2041 it is expected to run out completely. Just in time for our retirement. This is all from the horses mouth, or the 2007 Trustee report. Lots of things can happen to divert this- the GAO (Government Accountability Office) suggests that the year before Social Security goes bankrupt the shortfall could be met by cutting federal spending by 60% !!! or by doubling taxes!!! Fun stuff. Or cutting Social Security and Medicare benefits. More fun stuff that won’t happen on the Baby Boomers’ dime, but on ours.

  18. Peter says:

    What, are you a moron? Social Security has vast amounts of money flowing in; all that money will keep on getting paid out. As others have pointed out: at the low point, they’ll be able to cover 70% of the current bennies — and that’s assuming a pretty awful economy for quite a while (the SS trustees are very conservative when it comes to estimating how much money will come in)

    And the idiot who says that they can invest better: no, you can’t. When you compare SS to investments, be sure to include the guaranteed inflation protection, and the nifty features that even if you become disabled you still get money. Annuities with these benefits get radically less return than your current investments that (ahem) do not.

  19. moron, idiot. wow, peter. thanks for the breath of fresh air. we were wallowing in stupidity before you arrived.

  20. DaveOR says:

    A number of good pieces have been submitted;

    In the short/intermediate term SS benefits are not a finanical/mathematical issue but a political one, same as the debt/deficit. The longer term, more easily ignored with fuzzy governmental accounting, is where the hard reality resides.

    So SS and Medicare/Medicaid will exist for the near future, with perhaps even higher benefits, while the boomers age and the AARP gains even more political clout – few politicians will challenge their wants.

    SS will run out of funds – the government will not be able to sustain it at current levels, much less boomer demand, and then go beyond balancing the budget to start repaying all that it has borrowed to fund decades of deficits.

    Individuals have and will not put asside sufficient funds to cover their retirement – partly incented by tax policies that support increased consumption, which props up the economy and increases tax revenues, over savings for years.

    The mistake was made long ago that SS was not portrayed as an insurance policy not a guarantee – something you pay for, at a lower rate by spreading the risk, but may never end up benefiting from if you plan right and are lucky. Now rates are high and everyone is demanding they get it all back regardless of need. Ross Perot mentioned a means test and got strung up for just the idea.

    The longer we push out solving our financial issues the bigger the bust will be. Especially considering we haven’t elected anybody who didn’t promise something for everybody that would cost them nothing in years – begetting pork barrel politics.

  21. Matt says:

    I’m hoping that at some point in the near future a phase out can be implemented to allow each contributor to accrue a higher percent of their SS contributions every year into a private account. Eventually it could be as much as 50% kept for personal use.

    I’m very much on the fence how I feel about some kind of income limit for collecting SS. Would penalize people who work and invest smart, but that’s how income tax works as well.

  22. Jen says:

    OK, first, I most agree with Dong, the real thing we need to worry about is the Medicare. The baby boomers are just starting to hit medicare age. They are a HUGE generation and EVERYTHING will need to change to accomodate them.That’s pretty much true. Personally, I do believe that there will be something around when I retire, but since I don’t know what that will be, I’m not counting on it.

    Second, to those that say they should be able to opt out, I hate to tell you that you are not funding your own retirement with SS, you are paying for the support of your grandma. And you aren’t guaranteed to get out what you put in. That’s where the problem is, the system depends on more people contributing than collecting at any given time. and the # working:# collecting is getting smaller because there are fewer people in Gen X and people are living longer.

    Personally, I’ve made my peace with the fact that I am unlikely to get out of SS the same amount I put in (adjusted for inflation and all), and am uncomfortable with the idea of taking anything away from my Grandma (who lives in a nursing home in PA). It’s just our cross to bear.

  23. js says:

    I’m in my early 30’s and count on getting nothing from SS. I like that it helps my parents though who based *their* financial planning assumptions on getting something from SS (they are collecting now).

    I like in theory having a safety net beyond just “your ability to survive in old age depends on how well the stock market does”. That’s a pretty laughable thing to depend on, but as the SS system isn’t going to work very well for us ….

  24. Ted says:

    In regards to the opting out-

    Solutions that would allow people to own their own private accounts would not just cut people off. As I recall, most legislative options ensured that everyone over 55 would receive the full benefit, and the SS benefit fazing out down to 45 or 35 (can’t remember the particulars currently.

    Additionally, the government would have ensured a minimum level of benefits.

    Giving personal accounts would do two things that are important. First, it would give people an actual legal right to their benefits, unlike the current system where Congress can change our benefits whenever.

    Second, it would bring the current SS burden into the present. This would among other things, stop the government from raiding our money to pay for other government programs.

    There’s a lot of misinformation out there regarding SS personal accounts, mostly propogated by the AARP because they were shut out of the process. Their mailings are shameless.

  25. Amanda says:

    Social Security will not be around when I go to retire. In a few years, there will be more people on SS then there are to pay into the system. The debt ceiling has already been raised by 4 TRILLION dollars under the current administration. There. Is. No. Money. There is not going to be any money, even for 70% benefits. I’m really irate about that. Basically, the government is stealing from me, and from you. The solution is not higher taxes. The solution is for the government to stop spending money it doesn’t have, and for the American people to STOP SPENDING money they don’t have. Fat chance that’s going to happen.

    It’s all a big ponzi scheme. People like Ron Paul have proposed programs to allow people to opt out of SS while still paying the benefits to the elderly who depend on it, but no one in Washington wants to touch it with a 10-foot pole. Why? Because then they would actually be doing something useful, not just getting to raid the treasuries to build bridges to nowhere and other such useful things in their districts!

  26. Dave says:

    If you allow people to opt out, and continue paying out to current retirees without any source of income… how do you plan on funding that? If the current trust is going to run out WITH people paying in, imagine how fast it would be depleted if you stopped people from paying into it by diverting the incoming funds to private accounts. We’d add trillions of dollars to the debt… not something that sounds like a good idea at this point in time.
    I think DaveOR got it right. Social Security is not an investment that you should expect positive returns from, it’s a safety net to keep people who are elderly or disabled (or orphans, or widows) from starving. That Perot suggestion of having a needs test sounds like a wonderful idea.
    Unfortunately, social programs often devolve from being for the needy, to being for the greedy.

  27. Ed says:

    I am not counting on SS, but here is a couple of suggestions to keep it funded longer.

    1st raise retirement age, both the soonest you can take retirement, from 62 to 65, and maximum retirement benefits at 70 (then don’t allow for higher payments if you delay longer).

    2nd take the cap off SS payments into the system. Right now, FICA is capped at ~$95k, it is adjusted each year by a few thousand bucks. Just take the cap off, so people earning more will still keep paying.

    I would be very upset if people who prepared and saved for retirement were penalized for it by not getting SS based on some kind of ‘means’ test.

  28. Susan says:


    Good point, but that is not the main purpose of Social Security. According to the SS website, about 3% of the benifits are paid out for the purposes of disability. The other 97% is simply a very old age (67+) forced partial retirement plan that many people would opt out of if given the chance. If the goal is to take care of the handicapped, we could get rid of social security and set up a seperate fund for handicapped people which would take 0.459% (3% of the current 15.3% out of our salaries) and distribute to only the disabled. Heck, even if we set it up to take care of BOTH the disabled and the poor, the deduction would be 2.1%, not 15.3%. The problem with social security now is that if forces everyone who would be fine on thier own without it to participate in a forced retirement plan for everybody. I have no problem paying for poor and handicapped people, but don’t force me to pay into something for myself and other people who are well off.

  29. plonkee says:

    I’m assuming that at some point with all these programmes its going to be exclusively that the current workers pay for the current retirees. Given that I am in a relatively small age group, and by the time I retire, the baby boomers will be dead I reckon there’s a good chance that I’ll get some government money.

  30. Michael says:

    Legally, the federal government does not owe the trust fund debts to individual SS recipients. It owes money to the Social Security Administration. According to SSA’s Web site, the trust fund now has over two trillion dollars of debt in it. Congress borrows any surplus SSA takes in payroll taxes. If anything will happen in the near future, Congress will raise payroll taxes or lower benefits…so they can keep the surpluses rolling in. That way, they can keep borrowing money. As soon as the surpluses permanently dry up, I expect Congress to weep crocodile tears and declare Social Security bankrupt. Technically, it would not be bankrupt, because Congress owes SSA all of that money. But it probably will be spun that SSA owes SS recipients far more than it can ever pay.

  31. eROCK says:

    @ Peter

    Appreciate the name calling. Can you show us the difference between investing versus allowing the gov’t to hold our money for us?

    Assume an average return of 8% and do the math, take inflation into account and post your results.

    I think after you do the math you’ll be surprised at the results.

    @ Dave

    I don’t have time to post all the details, but certain ‘stops’ would need to be placed and SS would be phased out in stages … this way the suffering is minimal.

  32. Laura says:

    As of right now, I’m not counting SS into my retirement plans. I hope that some solution is made to keep it solvent. I like Ed’s idea about taking the cap off. That would at least increase income for the program.
    If my husband and I get SS, then that would be fantastic, but to be on the safe side, we’ll not count that just yet.

  33. Susan says:

    eRock, I did a quick calculation and you are right that the results are surprising. If you were to invest the 15.3% that social security takes out of your salary in an 8% account for 40 years, with 4% withdrawals after retirement, you’d be able to withdraw about 15 times your working salary. With current social security withdrawals, you only get back around 0.25 times your salary. So by saving on your own, you’d get back 60 times what social security pays you.

  34. BantyRed says:

    The SS reform proposal of 2005 seems pretty reasonable to me:

    Increase benefits more slowly (index to prices rather than wages)
    Optional private accounts (up to 1/3 of contributions)
    55 and older remain under current system

  35. dong says:

    I’m with the others. Social security is not an investment, and I don’t really have huge problem with that. It is a pyramid scheme and I’m ok with that. It’s pyramid scheme built on historically what’s been a pyramid population distribution. It’s really not much different than having children help out the parents in old age except on national scale. Most of the problem with social security have nothing to do with government spending per se as much as the fact that the population distributions have changed since the program was first established. This is always a risk even if every generation funds it’s own retirement through investing. Business investments face the same risks that come with changing demographics, just not as directly.

    I’m fine with idea of not getting social security because I probably won’t need it. I’m also fine with paying taxes to ensure the elderly today get benefits. But I’m probably a bit more of socialist then many other commentators here.

    This is not to say the social security system doesn’t need fixing. It’s program by it’s nature needs constant review, and that’s where the government has failed – not addressing the issue.

  36. Andrew Stevens says:

    I’m not even remotely a socialist, but I’m with dong on this. I have no objection to Social Security if we call it what it is – a welfare program. What bothers me about Social Security is that it was sold to the public (and still is) as a retirement program and it’s not. Some people have made absolutely fabulous returns on their “investments” (pretty much everyone up to and including the people retiring now, so long as they draw at least five or so years of payments – keep in mind that Social Security taxes used to be a much smaller percentage of income) and some people make really abysmal returns (those who die young and most people who have had the majority of their working years since payroll taxes were jacked up). The other thing that bothers me about it is that it’s a transfer payment from the poorest segment of our society (the young) to the wealthiest segment of our society (the old). If Social Security is a welfare program (and it is), then shouldn’t we means-test it and toss the rich old geezers out of the system? Moreover, as a welfare program, it’s funded in a really regressive manner. Due to income caps on Social Security, the rich contribute a much smaller percentage of their income to the fund than do the poor. Since they cap benefits, this would make sense if it’s a retirement program, but it clearly isn’t.

    By the way, let me include some data to show why people believe that Social Security is a great deal (because they’re looking at people who are drawing it or have drawn it in the past) and some people believe it’s a lousy deal (because they’re looking at people who are paying into it now). Here are the payroll tax rates from 1937-present:

    1937-1949: 2%
    1950-1959: went from 3% to 5%
    1960-1969: went from 6% to 9.6%
    1970-1979: went from 9% to 12.26%
    1980-1989: went from 12.26% to 15.02%
    1990-present: stayed level at 15.3%

    If you were paying in 2% (or even 0%, since old folks who paid in for only a year or two were still eligible to collect back when the program was founded), Social Security is a truly marvelous deal. If you’re paying in 15.3%, Social Security is a really terrible deal.

  37. Andrew Stevens says:

    There was a typo in my earlier post. 1970-1979 should read 9.6% to 12.26%. Social Security tax rates have never gone down.

  38. Brian says:

    Some excellent points and I agree with you, that it is best to NOT count on Social Security in your planning for retirement. Even if it’s still viable at a lesser benefit rate, who really knows how the inevitable shortfall will be made up(by lowered benefits AND means testing???). Better to be safe and if you get to collect it, great. If you don’t need the money, then donate it to charity.

  39. Liz says:

    I don’t know. I’ve always thought that social security is there as part of a societal safety net. I have a hard time imagining that it will be eliminated. In fact, I think it will only be eliminated were America to experience a total decline. All wealthy governments finance some sort of safety net for the poor, old, and disabled. I think that is good, which reflects my political slant.

    I think that it is unrealistic for anyone at age 30 to think that they can make solid predictions for their retirement. Basing it on social security or not, basing it on projected stock market returns, on stopping working, on being in the same relationship, etc. The fact is, that forty years from now we will all be in a totally different situation than we are now, personally, economically (100 years ago Britain was where the US is now), and politically (you never know what political changes will happen over time). That being said, I do think that it is important to save for retirement, and a good idea to take advantage of tax breaks to do so. You can do the exact planning when retirement gets a little closer.

  40. Susan says:

    Liz, in regards to your quote:

    “All wealthy governments finance some sort of safety net for the poor, old, and disabled”

    I agree for the poor and disabled, but not necessarily the old. Poor and old together, yes. Poor and well off, no. There is no need for us to be reducing our salaries by 15.3% to provide even more to the rich or even well off just because they happen to be old. If we were to only use social security for the old poor and the disabled, the deduction from our salaries would only be 2.1%. The main problem with social security is that we are not only financing the old poor, and the disabled, but also the old rich and disabled rich. Heck, just looking at the responses on this topic, most of the people here admit that they would be fine without social security.

  41. guinness416 says:

    Y’all can have the decade plus’s worth of social security I and husband paid in if it makes you feel better, we won’t be using it where we’ve moved to.

  42. lorax says:

    Think of SS as a variable annuity, varying at the rate of salaries. Add in the disability insurance. Compare it to a private plan of the same type. Then come back and tell me how bad it is. (Hint, it’s not what many think!)

  43. eROCK says:

    @ Susan

    Thanks for proving my point :-)

    SS has to be around to some degree to fund people on disability and unemployment. However, we should be able to choose what’s done with the money.

    @ Andrew

    You’ve laid out the reasons why I’d like to remove most of the SS system! Redistribution of wealth is something horrible and it needs to be ended.

    I appreciate seeing the numbers, surprising. People need to become accountable for their own retirement and the best way to do that is to not spoon feed those who don’t save on their own.

  44. maxconfus says:

    Not sure if ss will be around in the future or not but I do know some people from the late 70’s who opted out of paying ss because they thought it would not be around and are living today to regret that decision.

  45. Jane says:

    As someone who makes just over the cap. I don’t pay SS for the last 3 or so paychecks of the year. Leave my cap alone. The cap has also risen every year the last three years it is now a little more than $96K.

  46. Tanya says:

    What is the real problem with the system? Is it that the government can’t control the number of workers paying in (birth rate), the number of beneficiaries (death rate) the amount of taxes collected or the spending of Trust Fund monies?
    How can we ever expect to solve this if we can’t clearly agree on the real problem? I don’t know how the worker taking home $25,000 a year could save the amount of money needed to opt out of the system.

  47. Dawn says:

    I am 23. It isn’t so much that I am depending on living off my social security money when I retire…

    The real issue is that I pay 15% of my hard earned money to go to “people who need it” that I don’t even know. Which would be fine….IF…I could expect the same in return. I could really use every penny at this moment. The only thing that makes giving the 15% bareable, is the faith that I will “get it back” in some way or form. I work my *** off going to school full time and working full time. There are times when I run out of food before pay day. How is it justifiable to STEAL 15%, if you don’t plan to give it back in some way.

    I have so many issues with the government it isn’t even funny. I was never really interested with what was going on in Congress and the Senate, until I felt the personal impact they had on me! When I graduated (all smiles) and went out into the world, I learned the cold, hard, truth…

    No on is looking out for me! I am female. A lot of the females that are my age have kids, live off free housing and food stamps. Don’t work. Don’t try. They are content to live their lives like that. I didn’t put myself in the position to get knocked up by some low life before I could afford to…so I’m being punished. I refuse to apply for food stamps. Not because I don’t think that I deserve them or could use them. I most definitely could…I don’t apply because I’m sickened by all the people I have seen (with my own eyes) who do.

    I don’t want to be DEPENDENT on the government. You CAN’T be. In ANY way. Don’t count on getting social security benefits in 40 years, I don’t believe they will be there. If someone does come up with an idea to secure our financial future in some way…please get your idea out there. I would so support someone with a solid idea! If we leave it up to the “stiffs” in the government, we’re screwed!

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