If you’re worried that Social Security might run out before you retire, you’re not alone. Many young people, especially Millennials and Gen Zers, are concerned that this essential program might not be there for them when they reach retirement age. Social Security is an important part of many people’s retirement plans, but it’s important to realise that relying solely on it is risky. In this article, we’ll explore how Social Security works, whether it will be available when you retire, and steps you can take now to secure your financial future, even if Social Security doesn’t cover all of your retirement needs.
How Social Security Works
Social Security is a government-run program that helps retirees, disabled people, and others who need financial assistance. When you work, you pay into this system through payroll taxes. Employees and employers each contribute 6.2% of their wages, and self-employed individuals pay the full 12.4%. This money doesn’t go into an individual account for you but instead is used to pay current beneficiaries. In other words, the money you pay now helps fund benefits for people who are already retired.
The amount of Social Security you can expect to receive when you retire depends on several factors. These include how much you earned during your highest-earning 35 years of work and your age when you retire. While you can start claiming Social Security benefits at age 62, waiting longer can increase the monthly payout you receive. A Social Security benefits calculator can help you estimate how much you might get.
Will Social Security Exist When You Retire?
The good news is that Social Security is likely to still exist when you retire. According to the Social Security Administration’s 2024 report, the program will be able to pay full benefits to current retirees through 2035. After that, though, it’s expected that benefits will be reduced to about 83% of what is scheduled. This means that if you are retiring after 2035, you could receive less than the current average payout, which is around $1,976 per month. If benefits are cut to 83%, this amount would drop to about $1,640 a month.
This situation is certainly concerning, but it’s also important to remember that Social Security is not designed to cover all of your living expenses in retirement. It’s meant to be a foundation, not the entire income source.
Is Social Security Enough for Retirement?
Most retirees cannot live comfortably on Social Security alone. For many people, $1,640 per month (after 2035) won’t be enough to cover rent, groceries, healthcare, and other expenses. While Social Security can provide a steady income, it typically doesn’t replace a person’s full income before retirement. This is why it’s crucial to have other retirement savings to fall back on.
Even if you have a modest lifestyle, Social Security alone may not suffice. So, it’s important to focus on other ways to save and invest for your retirement.
Steps to Prepare for Retirement Without Relying on Social Security
Instead of relying on Social Security, you can take proactive steps now to ensure a comfortable retirement. Here are some of the steps that financial experts, including Dr. Constance Craig-Mason, recommend:
Review Your Retirement Options and Start Saving
If you’re struggling with living expenses now, saving for retirement might seem like an impossible task. However, even if you can’t save a lot initially, the key is to get started. Review your retirement options and set up the accounts you’ll need, so when you’re able to save, you’ll be ready. Talk to people who are already retired and learn how they got started. This can provide valuable insights on how to save money for retirement.
Maximize Your Employer-Sponsored Retirement Plan
If your job offers a 401(k) or another type of retirement plan with employer matching, you should take full advantage of it. For every dollar you contribute, your employer might contribute additional funds, which can help grow your retirement savings faster. In 2025, you can contribute up to $23,500 into your 401(k). If you’re over 50, you can contribute even more. This is an easy way to build your retirement savings without much effort.
Open an IRA
Once you’ve contributed the maximum to your 401(k), it’s time to think about opening an Individual Retirement Account (IRA). For 2025, the maximum contribution to an IRA is $7,000. An IRA can be a great way to save money for retirement while benefiting from tax advantages. There are two main types of IRAs: Roth and Traditional. Which one is right for you depends on your current tax situation and how you think your tax situation will change in the future.
Pay Off Your Mortgage
Eliminating major expenses, like your mortgage, can make a huge difference in your retirement plans. Once your mortgage is paid off, you’ll have more money to put toward your retirement savings. If you get a windfall, such as a tax refund or bonus, consider using it to pay down your mortgage faster. The sooner you eliminate this expense, the more money you’ll have for other savings.
Consider Lower-Cost Living
If possible, consider moving to an area with a lower cost of living. A few years ago, the author of this article moved from New York City to Charlotte, North Carolina, and saved a lot of money. Even if moving to a different city isn’t an option, consider relocating to more affordable neighbourhoods to free up more money for retirement.
Use Health Savings Accounts (HSAs)
Healthcare can be one of the largest expenses in retirement, so investing in your health now can save you money later. Consider contributing to a Health Savings Account (HSA) or a Flexible Spending Account (FSA) if your employer offers one. These accounts allow you to save money for medical expenses and reduce your taxable income.
Worrying about whether Social Security will be available when you retire is understandable, but it shouldn’t be your only focus. While it’s likely that Social Security will continue, it may not be enough to cover your living expenses in retirement. This is why it’s important to take control of your financial future and start saving now. Even if you can only contribute small amounts at first, the earlier you start, the better. Review your options, take advantage of employer-sponsored retirement plans, open an IRA, and work toward paying off major expenses like your mortgage. If you make these steps a priority, you’ll be better prepared for a comfortable retirement, regardless of what happens with Social Security.
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