What Social Security Will Look Like When You Retire

Social security isn’t going away, but what it will look like when you retire will depend on your age.

Talk abounds that the social security coffers would be empty for people who are in their thirties or forties, but many financial planners don’t expect that to happen. The jury is out, however, as to how it will look in thirty years from now.

“People plan on social security benefits not being there but that’s a little premature,” says Jeremy Kisner, senior wealth adviser at Surevest Wealth Management. “I don’t think they’ll make any changes within 15 years of collecting.”

That’s good news for people in their 50’s. Financial planners say that age group should expect little changes in social security, which means they won’t have to overhaul their investment plans or savings for their retirement.

Mark VandeVelde, a financial advisor at Hefty Wealth Partners, says he’s keeping plans the same for his clients who are 50 and above, but he does assume lower annual increases in the social security benefits than the government estimates. VandeVelde says he plans for a 1.5% to 2% increase instead of the 3.5% increase the government typically uses.

For those in their 20’s, 30’s and 40’s, what social security looks like in the future gets a little murky.

“Social security will be around in some form, but there is either going to be higher social security taxes or a reduction in benefits, or probably combination of both,” says VandeVelde. “Everyone knows the story that social security is set to exhaust its reserves in 2033, but what a lot of people don’t realize is it doesn’t mean the end of the program.”

When it comes to the future of social security, experts say there are a few scenarios that can play out. Kisner says people who are making $300,000 a year in retirement could see their benefits reduced by a certain amount because of their income level. Another scenario, one that is sure to cause a lot of unhappiness, is raising the social security tax or the amount both employees and employers pay in. The government can also choose to move the full retirement age up to 70, something they did in the 80’s when they pushed the full retirement ages to between 65 and 67, says VandeVelde.

He says it also isn’t far-fetched for talk about privatizing social security to come up again.

“All that stuff (about privatization) got swept under the rug and that will come back up,” says VandeVelde. “People believe they can handle their money better than the government.”

It’s not all bad news when it comes to social security. Although the baby boomers are exiting the work force in masse and taxing the social security system, the millennials, which is a group that rivals the baby boomers in size, are just now starting to make their money and contribute to the government program.

The millennials “are very good for the future,” says VandeVelde. “It doesn’t solve the social security problems, but it certainly helps.”

So what do future changes in social security mean to your retirement planning now? Experts say people who want to be extremely conservative should plan for zero social security, but a more realistic approach is to expect it being sliced by one-third or in half.

David Richmond, founder of investment firm Richmond Brothers, say he runs three scenarios with clients. That includes full social security benefits as it is now, 50% benefits and zero benefits. By doing that clients can see how much more they need to save to ensure they can fund their lifestyle in retirement.

“I don’t think we will see social security in its current form, but it doesn’t mean it goes to zero,” says Richmond. “You have to plan for it (social security), but don’t count on it.”