The Biggest Myth Baby Boomers Were Told About Social Security — And Why It Still Matters

Baby boomers today are roughly 61 to 79 years old. Many are retired, while some are still working.

Boomers have had their share of luck and challenges when it comes to finances. They’ve endured good stock and labor markets, but also, bad ones.

But through it all, many have banked on the promise of being able to collect Social Security during retirement. More so than that, boomers have long been reassured that Social Security will continue to pay them benefits for the rest of their lives.

But boomers may have been misled when it comes to Social Security. And now, many are paying the price.

The big lie baby boomers were told

Many baby boomers were led to believe that their Social Security benefits would replace their entire paychecks. In reality, those benefits only provide a limited amount of income, and they do a poor job of keeping up with inflation.

Boomers who earned an average paycheck during their working years can expect Social Security to replace about 40% of it. That’s not enough income to live on in retirement — or at least not to live comfortably.

Worse yet, Social Security’s annual cost-of-living adjustments, or COLAs, have long disappointed seniors. Those COLAs are supposed to help retirees maintain their buying power as inflation drives costs up. But because COLAs are calculated based on an index that doesn’t measure senior-specific costs, they often fall short.

There’s even worse news for boomers on Social Security

Not only won’t Social Security replace boomers’ paychecks in full, but those benefits could be facing sweeping cuts in less than a decade. Once Social Security’s trust funds run out of money, the program could be looking at roughly 20% cuts universally for retirement benefits.

Now, let’s think about the many retired boomers who are barely making ends meet on Social Security as it is. Let’s then imagine that they’re forced to take a 20% pay cut to their retirement income. That has the makings of a very dangerous financial situation.

Workers today have it better when it comes to Social Security

Today’s workers won’t be immune to Social Security cuts if they come to be. But one advantage younger workers have is that there’s a host of information about Social Security. And there’s enough information for workers today to know that benefit cuts are a possibility, and that even without cuts, it’s not a good idea to retire on Social Security alone.

Workers today can save for their senior years so they’re less reliant on Social Security. Many boomers unfortunately missed that boat. And those without robust nest eggs or pensions who are struggling already may be in for a world of pain if benefit cuts actually happen.

Even if Social Security does not end up reducing benefits, boomers could face many more years of insufficient COLAs that cause them to fall behind. Those who get most or all of their retirement income from Social Security may want to consider personal measures to improve their finances, like returning to work part-time or downsizing to reduce costs.

Unfortunately, things with Social Security are more likely to get worse than they are to get better.