Will the money run out? Young Americans and boomers butt heads over future reforms to Social Security — here’s why everyone could be at risk

Younger generations call for changes to program

Social Security is an earned benefit, as workers contribute to it through payroll taxes over their career. Once they reach retirement age, they can claim those benefits.

However, 4-in-10 Americans are concerned because they believe the program is now paying out more money to retirees than it's collecting in taxes. Millennials are the most likely to have these fears, with 52% reporting they believe more money is going out than coming in, compared with 39% of Gen Zers, a quarter of Gen Xers, and 39% of boomers.

Those worries over Social Security's finances are now prompting widespread calls for change, with 63% of Americans either agreeing or strongly agreeing that Social Security reforms are necessary compared to just 10% who either disagree or strongly disagree.

The desire for reform isn't shared equally among all generations, though. Millennials and Gen Zers are far more likely to want modifications compared with boomers. In fact, while just 56% of boomers think change would be appropriate, 76% of millennials and 69% of GenXers aren't content sticking with the status quo.

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Will Social Security provide a secure retirement?

While most experts agree younger Americans are justified in asking for changes to the Social Security program — finding a consensus on what form those changes should take is proving difficult.

"Unless policymakers fix Social Security's finances in the next 10 years, millions of retirees and people with disabilities would plunge into poverty," Richard Johnson, director of the Program on Retirement Policy at the Urban Institute, told Newsweek.

And as it turns out, the 40% of Americans who believe it's paying out more than it collects are correct. The most recent report prepared by Social Security's trustees revealed the cost for retirement and disability benefits exceeded the program's income by $41.4 billion in 2023.

The same report found that Social Security is currently running at a deficit and things are only expected to get worse. The cost of the program is expected to grow faster than the country's GDP through 2030 due to a combination of an aging population and persistently low birth rates.

Currently, the gap between the income coming in and benefits going out is being covered using Social Security's trust fund, or cash reserves. However, the retirement benefits trust fund is expected to be depleted by 2033. If a law change allowed Social Security's retirement and disability trust funds to be combined, solvency could be extended to 2034.

Why there's no simple solution

By law, Social Security cannot borrow like other government agencies can. If the trust fund runs out it could pay benefits only from money it's collecting. That would mean retirees would face around a 23% benefits cut as Social Security would collect only enough to pay out 77% of promised benefits.

Such a substantial cut would be difficult for retirees to absorb, especially as Social Security only replaces around 40% of pre-retirement income. That generally isn't enough to live on without supplemental funds and the shortfall will only grow if benefit cuts hit.

With the average 401(k) balance coming in at just $30,017 for Americans age 25 to 34 and $76,354 for those ages 35 to 44, according to Vanguard's 2023 How America Saves report, many young people are ill-prepared to provide the additional money they'll need if Social Security falls short.

Sadly, this group "would have the largest gap to cover in terms of lost revenue in retirement," as Ida Rademacher, vice president at the Aspen Institute and co-executive director of the Aspen Financial Security Program, told Newsweek.

Regardless of Social Security's uncertain future, current and future retirees of all ages should take steps to shore up their finances so their retirement security doesn't depend on the political headwinds that could shape any Social Security reforms coming down the pipeline.

Saving consistently, maintaining an appropriate investment mix, and living below your means are good ways to build security for your later years.