Say the words “Social Security” in a crowded room, and you’ll probably elicit some groans. That’s because the program’s financial woes are a known thing, to the point where a lot of workers are worried about whether Social Security will be there for them in retirement.
The good news is that Social Security isn’t in danger of disappearing completely. Given that its primary funding source is payroll-tax revenue, it can sustain itself for many years to come. But whether it can keep up with scheduled benefits is a very different story.
Based on recent projections, Social Security might have to cut benefits as early as 2034 if lawmakers don’t find a way to address the program’s financial shortcomings. It’s not surprising, then, to learn that 86% of Gen Xers are worried about the future of Social Security, according to recent data from Allianz.
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The problem, though, is that for some Gen Xers, retirement is really right around the corner. And those who don’t take steps to boost their savings might really end up struggling once their careers wrap up.
When there’s not a lot of time to play catch-up
Today’s older Gen Xers are in their late 50s, while younger members of that generation are in their early 40s. Those in the latter group have a reasonable chunk of time to boost their nest eggs if their IRAs or 401(k)s aren’t particularly robust. But for older members of Gen X, that savings window is dwindling.
As of now, Social Security’s full retirement age is 67 for Gen Xers. That could technically shift if lawmakers opt to make changes to the program’s rules. But for now, age 67 is when anyone born in 1960 or later can collect their monthly Social Security benefit in full. It’s also an age that might signal a desire to retire.
But for some Gen Xers without a lot of savings to compensate for potential Social Security cuts, there may, at this point, only be a 10-year window to build more of a nest egg. And that’s something workers in that position will need to take seriously.
A recent Northwestern Mutual study found that the average retirement savings balance among workers in their 50s is $110,900. This is based on a limited sample set, and it’s a number that should be taken with that classic grain of salt. But Gen Xers whose balances are similar should definitely recognize that the time to start ramping up their savings is now.
Furthermore, Gen X workers who don’t have much savings may want to consider delaying retirement. Doing so serves a dual purpose: It affords them the opportunity to boost their savings and also allows them to keep their existing nest eggs untouched for longer.
All told, it’s hard to know what exactly the future has in store for Social Security. But it’s also fair to anticipate benefit cuts for future recipients, given the state of the program’s finances. And the best way to make up for that is to go into retirement with as much savings as possible.
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