I Asked Financial Advisors What Millennials Get Wrong About Social Security
For many millennials, Social Security is a distant thought that isn’t informing their financial reality at the moment. But financial advisors say that mindset may be one of the biggest mistakes this generation can make when it comes to retirement planning.
While the program’s future may evolve, financial advisors weigh in on which aspects of Social Security millennials may be getting wrong today.
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They Think Social Security Won’t Exist
Many millennials assume Social Security won’t exist when they retire, which can lead to disengagement from planning altogether.
According to Drew Stevens, a Social Security expert, financial advisor and founder of Wisdom to Wealth, “That narrative has created apathy -- and that apathy is costly.”
In reality the system “will evolve, not disappear,” he said.
Anthony Sandomierski, CPA, managing partner and wealth advisor at Oujo Wealth Strategies, fears that millennials just aren’t thinking about Social Security at all right now -- and they need to be.
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They Don’t Realize the Long-Term Impacts of Ignoring Social Security
Many millennials don’t engage with Social Security in their 30s and 40s, missing opportunities to shape future benefits.
Stevens said that by ignoring it “they miss the opportunity to influence one of their largest future income streams. Earnings consistency, reporting accuracy and long-term planning all play a critical role -- and most people don’t address any of them early enough.”
They Don’t Realize Claiming Age Is More Than a Filing Decision
When to claim Social Security is an important piece of the retirement puzzle and millennials may not be thinking about this.
“Claiming early locks in a permanent reduction, while delaying can increase benefits significantly,” Stevens said. Millennials who aren’t thinking about Social Security now could “miss out on a six-figure difference,” he added.
This affects couples differently, particularly as they age and if one outlives the other, Sandomierski pointed out. “[When] one spouse passes away, the surviving spouse gets the higher benefit. You lose a lower Social Security benefit within the relationship.”
They Count Social Security Out Altogether
Advisors differ slightly on how much millennials should rely on Social Security but agree it should not be the sole pillar of retirement.
Stevens said it’s important to treat Social Security as a foundational income source, not a complete retirement plan. “Those who treat it as a supplement -- and build around it -- create far more financial certainty.”
Sandomierski suggested it’s not a bad idea for millennials to build other retirement income just in case.
They Don’t Know How Income History Shapes Your Future Benefits
Many millennials don’t realize how directly their earnings today affect their future Social Security income. Stevens explained, “Benefits are calculated using the highest 35 years of earnings. Every low-income year, or missed year, lowers the average.”
Millennials who can be strategic about income growth can potentially have higher lifetime benefits.
They Don’t Understand Policy Changes
Millennials are right to be concerned about Social Security’s future but they should plan for adjustments, not disappearance, Stevens said.
“Historically, changes have been phased in gradually. The key is staying informed and adaptable.”
There’s a high likelihood that millennials will have to collect later in life than current retirees to sustain the system, Sandomierski suggested.
The One Move Millennials Should Make Now
Despite uncertainty, millennials should “be intentional about income,” Stevens said. Increasing earnings over time is one of the most effective ways to increase guaranteed lifetime income in retirement, he explained.
Sandomierski believes that millennials should focus on their careers, namely on making as much as they can “to maximize your benefit.”
Social Security Is a Strategy, Not a Given
Millennials may not need to rely entirely on Social Security, but ignoring it could be a costly mistake. However, the biggest mistake is not starting retirement planning early, Stevens said, regardless of whether Social Security is a part of that plan.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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