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Younger generations of Americans apparently do not have a great deal of faith that Social Security will be available to them when they retire.
To that point, about 23% of Gen Z and 26% of millennials actually believe there is little likelihood that they will be able to rely on Social Security to help fund their retirement. That’s according to a Northwestern Mutual 2020 Planning & Progress study.
Meanwhile, just 7% of non-retired baby boomers similarly believe that there is a slim chance Social Security will be around when they retire.
Those findings should not come as a surprise to anyone.
After all, the financial outlook for Social Security has deteriorated over the past year. In fact, it has been widely reported that the Social Security trust fund most Americans rely on for their retirement will run out of money in 2033.
Meanwhile, traditional and current financial planning will advise future generations to work their retirement plans with Social Security still in mind.
With that said, the real concern and question then becomes: Should Gen Z and millennials count on Social Security?
A recent report from the U.S. Department of the Treasury speaks to this concern and highlights that even though Social Security may not completely run out of money, it will look quite different by the time current young adults reach retirement age.
Understanding this possible new reality should lead to a shift in thinking and responsibility on the part of younger generations. As a result, it’s apparent that it’s even more important for younger Americans to take further control of their own finances by investing and saving at every stage of their lives.
Here are some things Gen Z and millennials can do to create some financial peace of mind for themselves:
- Start investing in a self-directed individual retirement account, traditional IRA, Roth IRA or an individual brokerage account. Getting started early in life allows these accounts to grow and become the primary source for retirement savings.
- Find ways to diversify your sources of income. Do not have all of your income coming from one place.
- Create your own pension. There are a variety of financial options that can give someone a similar low-risk consistent income stream that a pension or Social Security would provide — for example, a single premium immediate annuity or a deferred annuity.
Needless to say, many Gen Zers and millennials truly believe that they may not have Social Security benefits to help fund their retirement. However, these young people need to understand that not having access to Social Security does not mean that any of their financial goals and aspirations should change.
It means they need to sharpen their focus and start planning now to decide which financial products they need to use to meet their financial goals.
— By Jordan Awoye, managing partner at Awoye Capital