Millennials in open office environment
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A report from the Urban Institute reveals that under current law, average-income millennials turning 30 this year are expected to retire with $1 million in benefits from Social Security and Medicare. Currently, comparable single adults retiring between 2015 and 2020 will receive about $500,000 in benefits over their lifetimes.

These estimates assume real dollars and no changes in current benefits for the two programs. And while twice as much in benefits may sound like good news, it’s anybody’s guess whether that will actually happen or if it does, whether it will be enough for a comfortable retirement.

In 2016, the U.S. Treasury released a report stating that Social Security payments could no longer be covered by the contributions of current earners, resulting in the program dipping into trusts to pay out benefits. As a result, the trusts could be depleted by 2034, resulting in a 23 percent benefit cut across the board regardless of age or income.

For millennials, a generation that faces the highest health care costs to date, burgeoning student loan debt and an overall struggle to save, the unknowns of Social Security’s future bring confusion and pessimism over their post-work years.

How benefits will change over time

Millennials don’t have much faith in the system. About 80 percent of millennials say they don’t expect to get any Social Security benefits when they retire, according to a recent study by the Transamerica Center for Retirement Studies.

It’s highly unlikely that the program will disappear entirely, though. Even with depleting trusts, Social Security is fueled by payroll taxes, and would comprise about 75 percent of retirees’ expected benefits.

Eugene Steuerle, institute fellow and co-author of the Urban Institute study, suggests the worry around depleted funds is likely a result of Social Security no longer running at a surplus, something it did for most of its existence.

In the 1980s and 1990s, baby boomers were fully in the workforce in some of their most productive years, which fueled Social Security trust funds into a surplus. Today, however, those boomers are dropping out of the workforce, with a dramatically decreasing number of workers paying into the system.

“[The depleting trusts] are quickly forcing us to deal with the fact that the current tax rate and benefit rates have to be addressed,” Steuerle told Bankrate.

That doesn’t mean Social Security is going to go bankrupt, though. Steuerle says that since it’s a “pay-as-you-go” program, it’s unlikely that Congress would let the program flounder before assisting with a fix.

What millennials can focus on, however, is that the program in its current state is unsustainable, says Steuerle.

In a separate, independent paper, Steuerle notes that outdated retirement age assumptions, automatic growth in benefits and rising health care costs are contributing to an unsustainable model. People now live six years longer and retire earlier than they did when the system was created in 1940, writes Steuerle.

“As lifespan increases, Social Security now promises a typical newly retired couple aged 62 an average of more than 28 years of benefits (today, one of them is likely to make it to 90 years of age),” writes Steuerle. “That’s more than enough; there are greater societal needs than the desire for more retirement years.”

Current proposals to change the Social Security benefit program include increasing the retirement age, changing cost of living adjustments, lowering benefits or adding withholding to income over $128,000, which the current cap for income subject to Social Security taxes.

Individual savings are lacking

Millennials shouldn’t rule out Social Security checks in their futures, but they need to do a better job at saving on their own.

Currently, only about one-third of millennials have money saved for retirement, according to a report from the National Institute on Retirement Security. The median amount for those accounts only adds up to about $19,000.

Weak savings can’t be entirely credited to poor decisions, though. Living expenses, like child care costs and health insurance premiums, are increasing for millennials while earnings are slow to catch up; in 2016, 41 percent of men ages 25 to 34 had annual incomes below $30,000, compared with 25 percent in 1975, based on 2015 dollars, according to the U.S. Census.

The lack of financial preparation spans across all generations, though. A recent Bankrate survey found that 58 percent of baby boomers don’t know how much money they’ll need to retire. As a result of being unprepared for life after work, the Bureau of Labor Statistics estimates that 25 percent of the average annual labor force will be Americans ages 55 and up by 2024.

How millennials can better prepare for retirement

Considering the fate of Social Security is a major unknown, building strong nest eggs now can help millennials cope with uncertainty about government programs.

To start, millennials should take advantage of any employer-sponsored 401(k)s, utilizing matches and saving at least the recommended 10 percent. Even if that amount is unattainable, saving up to an employer’s match is a good start. Those who aren’t offered employer-sponsored plans should consider putting their savings in an IRA or Roth IRA.

Additionally, building an emergency-savings account will help resist dipping into retirement accounts for emergency loans. Consider opening a high-yielding savings or money market account and take advantage of compound interest to make the most of that money over time.

Social Security isn’t going away, but to avoid the same fate as boomers who might never retire, younger generations should work now to take their financial futures into their own hands.

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