Personal Finance

More Than Half of Gen-Z and Millennials Expect Social Security Benefits to Cover Their Basic Retirement Needs

Kristin Hitchcock

Published: November 3, 2024 11:31 am

24/7 Wall St. Key Takeaways:

• There is a large gap between the younger generations and older generations when it comes to Social Security.
• Social Security should be seen as a supplement, not as your primary source of income in retirement.
• Also: Take this quiz to see if you’re on track to retire ^(Sponsored)

According to the Nationwide Retirement Institute® 2024 Social Security Survey, a surprising number of Gen-Z (63%) and Millennials (52%) believe that Social Security will cover their basic needs in retirement. Those statistics are very different from Gen X (36%) and older Americans (38%). These generations are much less optimistic about relying on Social Security alone.

This generational divide highlights a difference in expectations about retirement security. So, who is correct? Let’s explore Social Security and these expectations a bit more.

How Generations Differ in Social Security Expectations

Younger generations, especially Gen Z and Millennials, appear more optimistic about Social Security as a stable income source. This may simply stem from less experience with inflation and Social Security. They may also be more optimistic about future reforms to the program.

Meanwhile, Gen X and Baby Boomers have experienced more regarding inflation and heard more horror stories about Social Security, so they have a stronger grasp on potential gaps in benefits. These older generations have likely also researched Social Security in more depth because they are closer to retirement.

Reality Check

So, which assumptions about Social Security are correct? Well, based on current outlooks, basic retirement needs will likely not be covered completely by Social Security. Here’s why:

1. Rising Costs: Social Security benefits are tied to inflation. However, the cost of living can still outpace benefits, as it isn’t a perfect science. The amount of basic needs covered over time may decrease.
2. Potential Reforms and Funding Gaps: Current projections suggest Social Security may face funding shortages by the 2030s. Future generations will likely see reforms, whether that’s through reduced payouts or delayed retirement ages.
3. Increased Life Expectancy: People are living longer, which means that Social Security is paying people more over their lifetime.

While optimism can be motivating, it’s important to treat Social Security as a supplement rather than the foundation of retirement. A diversified retirement strategy, incorporating personal savings, investments, and employer-sponsored plans, will help ensure they meet future costs and enjoy financial stability.

While Social Security is still an important program, treating it as your primary source of income in retirement is wishful thinking.