What millennials are wrong about social security

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Few problems unite the millennial generations as the future of social security. Most of the time, they are convinced he does not have one.

A recent Transamerica survey found that 80% of the millennials, defined in the survey as people born between 1979 and 2000, fear that social security is not there when they need it. This is not surprising: for years, they have heard that social security is about to "run out of money."

The language does not correspond to reality. Social security benefits come from two sources: taxes levied on workers' current paychecks and a trust fund made up of specially issued US Treasury securities. This trust fund is expected to be exhausted in 203 4, but the system will still collect hundreds of billions of payroll taxes and send hundreds of billions of benefit checks. If Congress does not intervene, the system can still pay 77% of the expected benefits.

Be that as it may, the chances are good that Congress will intervene, as it did in 1977 and 1983, to strengthen the finances of social security. Social Security is an extremely popular program boasting bipartisan support and influential lobbies, including the very powerful AARP, looking for it.

Nevertheless, Generation Y members who believe that social security will not be there for them could make bad choices about retirement savings. The worst result would be that they do not spare at all, convinced that the retirement was hopeless. But any of the following myths could cause problems.

"I CAN SAVE TO REMOVE EVEN WITHOUT SOCIAL SECURITY"

Good luck with that.

Currently, the average social security benefit is just under $ 1,500 a month. You would need to save $ 400,000 to generate a similar amount. (Assuming you use the 4% rule of financial planners, which recommends not taking more than 4% of the portfolio in the first year of retirement and then adjusting it for inflation.)

And that may underestimate the value of social security. The Urban Institute estimates that many single, middle-income adults who will be retiring between 2015 and 2020 will receive about $ 500,000 in benefits from the system, while couples will receive about $ 1 million. Millennials, meanwhile, should receive twice as much: about $ 1 million for an average-income adult and $ 2 million for a couple.

Trying to save enough to replace 100% of your expected social security benefits may not be possible, and you may want to focus on other important goals, such as saving for your children's education or even having a little time. in time.

According to Bill Meyer, founder of Social Security Solutions, a software tool for social security claim strategies, a more realistic approach while remaining cautious would be to assume that you will get 70% to 80% of the projects in your security statement social.

"Somewhere, a reduction of 20 to 30% seems to me to be the worst case scenario," says Meyer.

"I CAN IGNORE MY SOCIAL SECURITY ACCOUNT"

Your future social security audit will be based on your 35 highest earning years. However, to get what you owe, your earnings must be accurately reported, which does not always happen. Employers may not report the correct information to Social Security or report your income at all. You can correct these mistakes if you catch them on time. Solutions could be difficult in decades, when the employer may have ceased operations and the necessary documents may be unavailable.

Millennials may be more prone to errors than previous generations, as they tend to change jobs more, says Meyer. That's why it's important for them to check their financial results, which they can do by creating an account on the Social Security Administration's website.

"Every two or three years you have to log in and make sure your income is properly reflected," says Hayes.

"IF THIS IS ALWAYS AROUND, I SHOULD SEIZE IT AS SOON AS POSSIBLE"

Millions of Americans commit this mistake each year, blocking permanently reduced payments and risking losing up to $ 250,000 in lost benefits by making a claim too early. However, it is highly unlikely that Congress will remove benefits for retirees or those nearing retirement age, notes Meyer.

Instead, there will likely be incentives to delay your social security claim. Currently, benefits increase from about 7% to 8% for each year of waiting after age 62, until benefits reach 70 years of age.

Working for a few more years can also compensate for years of low income, if not zero, of millennial careers, when incomes may have been depressed by recession or work in concert.

"A year with higher incomes can replace a lower year," says Meyer. "You can fill those gaps."

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This column was provided to The Associated Press by the NerdWallet Personal Finance website. Liz Weston is a columnist for NerdWallet, Certified Financial Planner and author of "Your Credit Score". Email: [email protected]. Twitter: @lizweston.