Social Security for Millennials

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dh
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Re: Social Security for Millennials

Post by dh » Wed Aug 16, 2017 7:24 am

fantasytensai wrote:
Tue Apr 04, 2017 9:32 am
I think Bogleheads is the wrong place to ask this question. Millennials on Bogleheads will tend to be good planners/savers and will have enough to live off by retirement, making any SS "gravy". However, I imagine a vast majority of millennials will be depending on SS as a primary source of income in retirement.
I am always surprised when I read that millennials don't believe social security will be there for them. It may be that many are excellent savers and see SS as "gravy" -- that may take away many irrational fears.

SS is the primary source of income for many in retirement, and that fact may increase unless we see the vast majority of American's really step up their savings. I see the "gravy" idea flipped 180 degrees, especially given the lack of pensions in America. Rather than fear for SS, I fear that many haven't saved enough in retirement plans (a dollop of gravy) to supplement their SS. Pensions are gone, people will rely on SS and their personal savings going forward. As others have mentioned, retirees vote. Politicians will do the tweaks necessary to save SS when their backs are against the wall.

I appreciate everyone staying away from political discussion that would block this thread. It is an important one to keep going and continue learning from. Thank you!

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Re: Social Security for Millennials

Post by Valuethinker » Wed Aug 16, 2017 7:30 am

dh wrote:
Wed Aug 16, 2017 7:24 am
fantasytensai wrote:
Tue Apr 04, 2017 9:32 am
I think Bogleheads is the wrong place to ask this question. Millennials on Bogleheads will tend to be good planners/savers and will have enough to live off by retirement, making any SS "gravy". However, I imagine a vast majority of millennials will be depending on SS as a primary source of income in retirement.
I am always surprised when I read that millennials don't believe social security will be there for them. It may be that many are excellent savers and see SS as "gravy" -- that may take away many irrational fears.

SS is the primary source of income for many in retirement, and that fact may increase unless we see the vast majority of American's really step up their savings. I see the "gravy" idea flipped 180 degrees, especially given the lack of pensions in America. Rather than fear for SS, I fear that many haven't saved enough in retirement plans (a dollop of gravy) to supplement their SS. Pensions are gone, people will rely on SS and their personal savings going forward. As others have mentioned, retirees vote. Politicians will do the tweaks necessary to save SS when their backs are against the wall.

I appreciate everyone staying away from political discussion that would block this thread. It is an important one to keep going and continue learning from. Thank you!
It is important to understand that the US has better demographics than almost any developed country.

SS will peak in 2030s, as the Baby Boomers start to die off. At around 4.5% of GDP, well below what some developed countries pay *now*.

The Gen X and Y cohorts are successively bigger than the Boomers, so there is the capacity to pay pensions.

The SS system is in no sense at the financial situation it was in the mid 1980s, when Ronald Reagan and Tip O'Neill struck their famous bargain (that has raised retirement ages and payroll deductions as it has now, since then).

Thus the solution is a political one. It is not insuperable.

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Re: Social Security for Millennials

Post by CyclingDuo » Wed Aug 16, 2017 9:10 am

Nate79 wrote:
Sat Apr 08, 2017 5:48 pm
It is quite humorous that people come on here and state they don't take into account any SS in their future plans but likely have 16 significant figures in their real expected return for their portfolio for the next 30 years before retirement, plan to max out all retirement accounts etc. As if their ability to see 30 years in the future is so good and yet they can't see that SS will be there for them at all. As if nothing in life can come along and drastically change their lives yet the one thing in their life that is probably the safest asset (SS) is disregarded.

I predict these same people will be back in 20 years asking how to maximize their SS......
^This! :mrgreen:

Great post, Nate79!

We'd need an additional $1.XM as replacement by retirement age to make up for any thought that SS wouldn't be there in retirement. That's going to be difficult to do in a decade based on our salaries, so we are certainly accounting for SS in the future.
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Re: Social Security for Millennials

Post by spdoublebass » Wed Aug 16, 2017 11:20 am

I'm a millennial, 34.

Yes, I'm counting on SS, but I don't think about it. I'm trying to prepare like SS will be gravy as mentioned above.

I know many of us millennials are concerned about this, but from the folks I know who made $50K a year and are retireing on a small nest egg (maybe 100-200K) and relying on SS, their main concern is Medicare.

Medicare is not a fixed rate. The cost can fluctuate. I'm more concerned about where my health care will come from in retirement, not what amount of SS I'll be getting.
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Re: Social Security for Millennials

Post by Rainmaker41 » Wed Aug 16, 2017 11:38 am

spdoublebass wrote:
Wed Aug 16, 2017 11:20 am
I'm a millennial, 34.

Yes, I'm counting on SS, but I don't think about it. I'm trying to prepare like SS will be gravy as mentioned above.

I know many of us millennials are concerned about this, but from the folks I know who made $50K a year and are retireing on a small nest egg (maybe 100-200K) and relying on SS, their main concern is Medicare.

Medicare is not a fixed rate. The cost can fluctuate. I'm more concerned about where my health care will come from in retirement, not what amount of SS I'll be getting.
Good point. It's one thing to extrapolate non-health retirement expanses based on one's current budget and compare that to expected social security benefits (whatever one takes that to mean). It's another entirely to work out future health expenses from a crystal ball.

For most people, Social Security is their bedrock. Roughly, ~savings minus health expenses~ determines the degree of comfort they have above that.
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Re: Social Security for Millennials

Post by surveyor » Wed Aug 16, 2017 12:00 pm

Valuethinker wrote:
Wed Aug 16, 2017 7:30 am
The Gen X and Y cohorts are successively bigger than the Boomers, so there is the capacity to pay pensions.

The SS system is in no sense at the financial situation it was in the mid 1980s, when Ronald Reagan and Tip O'Neill struck their famous bargain (that has raised retirement ages and payroll deductions as it has now, since then).

Thus the solution is a political one. It is not insuperable.
There are way fewer Gen Xers than Boomers. For now, Boomers and Millenials are roughly equal IIRC.

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Re: Social Security for Millennials

Post by lazydavid » Wed Aug 16, 2017 3:50 pm

surveyor wrote:
Wed Aug 16, 2017 12:00 pm
There are way fewer Gen Xers than Boomers. For now, Boomers and Millenials are roughly equal IIRC.
As was pointed out upthread, this is only true if you fail to take into account that Gen X is shorter (in years) than either of its adjacent generations. When looked at in terms of persons/year they are very, very close.

As for the original question, though I'm a Gen Xer, my FRA is well after 2034, so still have to consider the implications. Though I fully expect that SS will be around in some form, and the 79% is as good an estimate as any, I've ignored it for planning purposes. That way I know I can maintain a comfortable lifestyle on my own finances, and whatever SS we get will just add flexibility or allow us to leave more in our estate.

I am not however, compounding this under-projection by planning for an ultra-conservative SWR like the 3% or 2.5% I'm increasingly seeing pop up on here. Once I hit 4%, I know I'm FI and can retire whenever I want. SS in it's 2045-2048 form will simply be an additional buffering layer that ensures success.

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Re: Social Security for Millennials

Post by CyclingDuo » Wed Aug 16, 2017 5:14 pm

surveyor wrote:
Wed Aug 16, 2017 12:00 pm
Valuethinker wrote:
Wed Aug 16, 2017 7:30 am
The Gen X and Y cohorts are successively bigger than the Boomers, so there is the capacity to pay pensions.

The SS system is in no sense at the financial situation it was in the mid 1980s, when Ronald Reagan and Tip O'Neill struck their famous bargain (that has raised retirement ages and payroll deductions as it has now, since then).

Thus the solution is a political one. It is not insuperable.
There are way fewer Gen Xers than Boomers. For now, Boomers and Millenials are roughly equal IIRC.
11.2 Million Boomers had died by 2012. In the last 5 years, another glob of us have passed. Immigrants have, however, filled in the gap.

http://www.prb.org/Publications/Article ... There.aspx

The Census Bureau currently projects that the baby-boom population will total 61.3 million in 2029, when the youngest boomers reach age 65. By 2031, when the youngest baby boomers reach age 67 (the age at which persons born in 1964 can receive full Social Security benefits), the baby-boom population is projected to be even lower, at 58.2 million.

The largest demographic, Millennials, are about 75.4M based on births alone. Add in immigrants, and they outnumber the Boomers with immigrants.

And Generation X (ages 35-50 in 2015) is projected to pass the Boomers in population by 2028. (Boomers dying off....)

http://www.pewresearch.org/fact-tank/20 ... y-boomers/

Suffice it to say, the population behind us Boomers is plenty to fund the Boomers SS needs.... :mrgreen: :moneybag :moneybag
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Re: Social Security for Millennials

Post by chinto » Wed Aug 16, 2017 9:33 pm

Fellow Millennials:

How do you plan to compensate for this 21% shortfall in Social Security retirement benefits as dictated by current law?
I'll answer for my Millennial offspring. Don''t count on SS being here, don't count on the U.S. being an intact country in the future, don't assume that there is as any reason if you have a job that pays 2x the median that your compensatory rate will stay in tact across your a career.

Contribute the maximum to your ROTH 401K plan, contribute the maximum to your Roth IRA, and very importantly set a side a large portion of your salary for a taxable investment account and for a future housing fund. Max your HSA plan and pay out of pocket for medical expenses If possible you should try and live on less than 30% of your gross income.
Last edited by chinto on Thu Aug 17, 2017 12:01 am, edited 2 times in total.

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Re: Social Security for Millennials

Post by willthrill81 » Wed Aug 16, 2017 9:46 pm

spdoublebass wrote:
Wed Aug 16, 2017 11:20 am
I'm a millennial, 34.

Yes, I'm counting on SS, but I don't think about it. I'm trying to prepare like SS will be gravy as mentioned above.

I know many of us millennials are concerned about this, but from the folks I know who made $50K a year and are retireing on a small nest egg (maybe 100-200K) and relying on SS, their main concern is Medicare.

Medicare is not a fixed rate. The cost can fluctuate. I'm more concerned about where my health care will come from in retirement, not what amount of SS I'll be getting.
I agree that SS should generally be a larger concern for those who aren't saving and investing like most Bogleheads. I doubt that many serious Bogleheads would be very adversely impacted by the complete cessation of SS.

While I could mathematically incorporate SS into my plans, it actually doesn't make a substantial difference because I'm planning on retiring at 55 and not claiming SS benefits until 70. Attempting to span that 15 year period without SS with alternative funding is nearly equivalent to just planning on never having it at all. Whatever I get from SS will be the cherry on top of my sundae. :) I just hope that my health will still be good enough by then for me to really enjoy it.
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Will social security be cut in 2034?

Post by tc101 » Wed Jan 02, 2019 12:20 pm

[tc101's topic was locked for moderator review. It and the replies have been merged into this existing topic and unlocked after review - moderator prudent]

The quote below is from the Miami Herald, but you can read the same thing in lots of other stories on line. The government mailing about SS says it may be cut to 79% in 2034.
In 2022, Social Security’s trustees report, the U.S. government’s retirement income program will begin paying out more in benefits than it receives in tax revenues. By 2034, a year short of its 100th birthday, Social Security’s $3 trillion in reserves will be gone. Benefits will have to be cut by nearly a quarter.

And it’s all downhill from there.
https://www.miamiherald.com/opinion/op- ... 53844.html

So what is the probability of this actually happening? If it is even a 50% probability doesn't that change the wisdom of waiting until age 70 to start collecting?
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Re: Will social security be cut in 2034?

Post by JBTX » Wed Jan 02, 2019 12:34 pm

Options are:

1. Benefits are automatically cut to 79% to continue funding
2. Program is modified legislatively to decrease shortfalls
3. Congress decides to fund shortfall from general funds/budget deficit.

Nobody has any idea what exactly will happen. Pure speculation. This thread may get locked.

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Re: Will social security be cut in 2034?

Post by willthrill81 » Wed Jan 02, 2019 12:39 pm

tc101 wrote:
Wed Jan 02, 2019 12:20 pm
So what is the probability of this actually happening? If it is even a 50% probability doesn't that change the wisdom of waiting until age 70 to start collecting?
We must be very careful to not let this thread get political. Speculation about changes in the law are forbidden on this forum.

Under current law, Social Security benefits are projected by the SS Administration to be cut by approximately 30% in approximately 15 years. As such, this 30% cut should be incorporated into one's plans. It isn't very clear yet, but I believe that current law states that this cut would be applied to all SS benefits, including those who have been receiving benefits for many years (i.e. no 'grandfathering in').

I would never recommend that any retiree plan on SS benefits not being cut. The risk is simply too high that they will, and the consequences of such an assumption may be far too severe.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Will social security be cut in 2034?

Post by HomerJ » Wed Jan 02, 2019 12:47 pm

willthrill81 wrote:
Wed Jan 02, 2019 12:39 pm
tc101 wrote:
Wed Jan 02, 2019 12:20 pm
So what is the probability of this actually happening? If it is even a 50% probability doesn't that change the wisdom of waiting until age 70 to start collecting?
We must be very careful to not let this thread get political. Speculation about changes in the law are forbidden on this forum.

Under current law, Social Security benefits are projected by the SS Administration to be cut by approximately 30% in approximately 15 years. As such, this 30% cut should be incorporated into one's plans. It isn't very clear yet, but I believe that current law states that this cut would be applied to all SS benefits, including those who have been receiving benefits for many years (i.e. no 'grandfathering in').

I would never recommend that any retiree plan on SS benefits not being cut. The risk is simply too high that they will, and the consequences of such an assumption may be far too severe.
This.

We cannot speculate on future changes to Social Security.

Under the current situation, one should plan on SS being cut in the 2030s, and that absolutely does change the wisdom of waiting until 70 to start collecting for some people.
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Re: Will social security be cut in 2034?

Post by delamer » Wed Jan 02, 2019 12:50 pm

A lot depends on when you (and/or your spouse) turn 70.

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Re: Will social security be cut in 2034?

Post by smitcat » Wed Jan 02, 2019 12:52 pm

tc101 wrote:
Wed Jan 02, 2019 12:20 pm
The quote below is from the Miami Herald, but you can read the same thing in lots of other stories on line. The government mailing about SS says it may be cut to 79% in 2034.
In 2022, Social Security’s trustees report, the U.S. government’s retirement income program will begin paying out more in benefits than it receives in tax revenues. By 2034, a year short of its 100th birthday, Social Security’s $3 trillion in reserves will be gone. Benefits will have to be cut by nearly a quarter.

And it’s all downhill from there.
https://www.miamiherald.com/opinion/op- ... 53844.html

So what is the probability of this actually happening? If it is even a 50% probability doesn't that change the wisdom of waiting until age 70 to start collecting?
"So what is the probability of this actually happening? If it is even a 50% probability doesn't that change the wisdom of waiting until age 70 to start collecting?"
Giving a math answer and not a political answer - if SS is cut by a % across the board then the advantages and/or disadvantages of waiting till 70 are likely unaffected.

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Re: Will social security be cut in 2034?

Post by Big Dog » Wed Jan 02, 2019 12:54 pm

Surprisingly, I ran Open Social Security and the recommendation for us did not change. (I still wait until 70.)

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Re: Will social security be cut in 2034?

Post by Nate79 » Wed Jan 02, 2019 12:57 pm

willthrill81 wrote:
Wed Jan 02, 2019 12:39 pm
tc101 wrote:
Wed Jan 02, 2019 12:20 pm
So what is the probability of this actually happening? If it is even a 50% probability doesn't that change the wisdom of waiting until age 70 to start collecting?
We must be very careful to not let this thread get political. Speculation about changes in the law are forbidden on this forum.

Under current law, Social Security benefits are projected by the SS Administration to be cut by approximately 30% in approximately 15 years. As such, this 30% cut should be incorporated into one's plans. It isn't very clear yet, but I believe that current law states that this cut would be applied to all SS benefits, including those who have been receiving benefits for many years (i.e. no 'grandfathering in').

I would never recommend that any retiree plan on SS benefits not being cut. The risk is simply too high that they will, and the consequences of such an assumption may be far too severe.
I disagree that one should use a 30% cut in their plans. How or if it will be cut is pure speculation at this point even if it requires legislative changes. I believe one should make the best guess as to what they believe the future holds and project off of that even if you guess that it would include a law change. Just because we can not discuss it on Bogleheads doesn't mean one should ignore future law changes in their planning.

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Re: Will social security be cut in 2034?

Post by Artful Dodger » Wed Jan 02, 2019 1:02 pm

tc101 wrote:
Wed Jan 02, 2019 12:20 pm
If it is even a 50% probability doesn't that change the wisdom of waiting until age 70 to start collecting?
Most fall into two camps. 1) You want to get the most out of SS as early as you can, or you expect a shorter lifespan, then you'll want to collect early, or 2) You want SS to be longevity insurance, and / or you expect to have a longer lifespan, then you'll wait to age 70, or close to age 70. Spouse age and benefit will play a role in many choices.

If you really believe in the likelihood of a cut, option 1 looks appealing. But, the longer you live, option 2 still has merit. If your age 62 amount is $1500, you will definitely benefit in the early years before the cut, but if you wait to file at age 70, and your amount is $2640, when benefits are cut, in real terms you'll be receiving $2640 X .7 = $1848 vs the early filer at $1500 X .7 = $1050. Assuming I have enough money to live on 62 to 70, the much higher benefit payout and longevity insurance is still very appealing.

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Re: Will social security be cut in 2034?

Post by jacksonm » Wed Jan 02, 2019 1:02 pm

HomerJ wrote:
Wed Jan 02, 2019 12:47 pm
Under the current situation, one should plan on SS being cut in the 2030s, and that absolutely does change the wisdom of waiting until 70 to start collecting for some people.
I'm not sure how this wisdom actually plays out in reality.

On one hand I could see it as a reason to claim as early as possible because a bird in the hand is worth two in the bush. I suspect that already factors into the thinking of a lot of people who claim early.

On the other hand, 70% of the max amount gained by delaying until 70 is still greater than 70% of whatever else it would be if you claimed early.

Personally, I'm delaying right now to get the max (70 this year) but only time will tell if the math actually works out in the long run. I don't think any of the SS calculators I've ever used to calculate the best strategy has ever taken into the reduction in benefits.

One thing I worry about as far as congress taking up the issue is that rather than keeping things as they are and just figuring out how to fund the shortfall they will be debating something like "comprehensive social security reform". And that may include bigger cuts for the top recipients while trying to keep the lower ones the same and/or some kind of means testing.

I know threads like this usually end up getting locked for being too political but these are just the facts on the ground as I see them and I don't know why the discussion needs to turn political.

Though it probably will.
Last edited by jacksonm on Wed Jan 02, 2019 1:05 pm, edited 4 times in total.

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Re: Will social security be cut in 2034?

Post by smitcat » Wed Jan 02, 2019 1:03 pm

Big Dog wrote:
Wed Jan 02, 2019 12:54 pm
Surprisingly, I ran Open Social Security and the recommendation for us did not change. (I still wait until 70.)
Yes - and you can also vary the SS payments in the extended IORP and RPM and see what they say. In our case we also get the same results, wait till 70.

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Re: Will social security be cut in 2034?

Post by JoeRetire » Wed Jan 02, 2019 7:57 pm

tc101 wrote:
Wed Jan 02, 2019 12:20 pm
So what is the probability of this actually happening?
Unless the laws are changed, the probability is 100%.

In actuality, Social Security is an extremely popular program, and few politicians want to be the ones who made Granny poor. I suspect there is a 90% chance that changes are made before cuts kick in.
If it is even a 50% probability doesn't that change the wisdom of waiting until age 70 to start collecting?
No. That wouldn't change anything.

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Re: Will social security be cut in 2034?

Post by willthrill81 » Wed Jan 02, 2019 10:31 pm

jacksonm wrote:
Wed Jan 02, 2019 1:02 pm
HomerJ wrote:
Wed Jan 02, 2019 12:47 pm
Under the current situation, one should plan on SS being cut in the 2030s, and that absolutely does change the wisdom of waiting until 70 to start collecting for some people.
I'm not sure how this wisdom actually plays out in reality.
If you knew at age 62 that your benefits would be reduced by 30% 8 years later (i.e. 2034), regardless of when you started collecting those benefits, then the actuarial tables that SS benefits are based on would no longer be 'sound'. They would decidedly shift in favor of collecting early. The reason is because collecting at age 62 or age 70 under normal circumstances results in you having collected the same total benefits by your life expectancy. Not cutting benefits at age 62 but cutting them 30% by age 70 would definitely shift the break-even point beyond your life expectancy. So, all else being equal, you would certainly start collecting benefits at age 62 in this scenario. How realistic this scenario is is debatable but just not on this forum.
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Re: Social Security for Millennials

Post by willthrill81 » Wed Jan 02, 2019 10:36 pm

dh wrote:
Wed Aug 16, 2017 7:24 am
SS is the primary source of income for many in retirement, and that fact may increase unless we see the vast majority of American's really step up their savings.
You're conflating people on this forum with the general populace. For most Millennials on this forum, SS will very likely not be their primary source of income in retirement. But for the general populace, it likely will continue to be.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Social Security for Millennials

Post by JustinR » Wed Jan 02, 2019 11:00 pm

Like many have already stated, SS is so unreliable and far in the future for millennials that it's best to just completely ignore it for planning purposes.

Also, I'm guessing many Boglehead millennials plan to FIRE, which makes SS even less relevant than it already is. (In two ways: further from retirement date, and less years worked meaning a smaller payout)

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Re: Social Security for Millennials

Post by SoAnyway » Thu Jan 03, 2019 12:37 am

NoVaBlue wrote:
Tue Apr 04, 2017 3:30 pm
wolf359 wrote:Not a millennial, but GenX. We had similar skeptical attitudes about Social Security when we were your age.
:beer Kudos to you, wolf359. (And I should add kudos to the OP for framing this topic well to avoid violating the no-politics policy, and to the mods for letting this thread survive. This is an important issue for young Bogleheads to discuss, provided we can bracket the political stuff to the side.) That's a very sensible way to approach the uncertainty of future SS income streams. Someone else above summarized this mindset quite well when they said they only consider SS the "gravy," and they plan to produce the "steak and potatoes" with their own savings -- that way, if the "gravy" doesn't materialize, you're still assured a good meal.
:sharebeer

Gen Xer here. +1 to all of the above. This is a hugely important topic for financial planning purposes, esp. for young BHs. That said, I have no desire to violate forum rules or get into policy discussions.

OP, if I understand the generational cutoffs correctly, Millennials are currently 22ish-37ish years old. If the GenX perspective is at all helpful to you, I offer the following: Please understand that as others have noted, the fear of SS going up in smoke is nothing unique to the Millennial generation. I reiterate what others have said that the fear-mongering about SS was alive and well back in my early 20s to mid-30s. Most of my peers were convinced that we'd never see a dime of what we'd contributed. If you asked any Gen Xers at the time, plenty would have said they were adopting a "stick my head in the sand, pretend it's not happening, and worry about it later" approach. For those of us, uh, a *bit* more proactive, we were convinced that SS would be bankrupt before we hit 65.

We adopted various strategies to deal with it. wolf359 was way ahead of me at the tactical level of actual modeling scenarios. I merely assumed - like many of my peers - that Social Security would not be there when I turned 65. If I were wrong, it'd be gravy. So I decided I needed to do my best during my working years to first pay off all student loans, and then sock away as much as I could because I might have to self-fund everything from 65 on.

Corporate pensions were already disappearing - or had disappeared - at that stage for my generation. Bottom line: If the 3-legged stool of retirement funding was SS+pension+savings, it was pretty clear to me back in my mid-20s/early 30s that: The first leg (SS) was shaky at best; I'd never have the second leg (pension); so all I had was the third leg (me and what I could do while working).

So I decided I'd better get d*mn good at saving, LBMM, investing, etc. BTW, I'm glad I did because I couldn't have predicted that the "social contract" would be irretrievably broken such that employers would start putting folks "out to pasture" before 65 - first with the late 80s/early 90s "golden handshakes" at 60+; then with the dot-com bust approach of mass layoffs at 55+; then with the financial crisis approach of jettisoning anyone 50+ (and many more who were younger but could adapt more easily), etc. I also decided that I needed to do what I could to stay healthy: A major health issue would throw a huge monkey wrench into the machinery. Indeed, at the time (not sure if it's still true) the #1 reason for personal bankruptcy filings was medical bills.

BTW, the irony in all of the media attention to Social Security and its financial stability back then: I couldn't freakin' believe that there was relatively little attention paid to the coming Medicare crisis. After all, having spent my working life in and around healthcare and policy, I knew that the government's SS obligations were a drop in the bucket compared to Medicare spending obligations, and the latter were growing at alarming rates. :o But I'll stick to the topic at hand. SoAnyway....
NoVaBlue wrote:
Tue Apr 04, 2017 3:30 pm
Like wolf359, I'm Gen X (will be 41 this year), and I'm doing my best to treat SS as "gravy"/"income floor"/"longevity insurance," rather than a fundamental part of my retirement income that I MUST have. I believe the basic Boglehead approach is also, conveniently, the best answer to uncertainty about SS:

1) Get used to living below your means -- which makes it easier not to rely on SS to meet your retirement needs;
2) Diversify -- don't count too much on ANY one investment type or income source (including SS/Uncle Sam);
3) Invest (i.e., SAVE) early and often, as much as you can.

If you can do the above -- and most of the people on this board are already doing so -- then any SS shortfalls during your retirement will be a nuisance, but not a disaster.
Well said, NoVaBlue. The only thing I'd add - hopefully without violating forum rules - is 4) to do what you can in your off-forum activities to influence policy on these matters - in whatever direction suits your political leanings.
Nothing in this post constitutes legal or medical advice. | Consult your attorney or physician to verify if/how anything stated might or might not be applicable to your specific situation.

bluquark
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Re: Social Security for Millennials

Post by bluquark » Thu Jan 03, 2019 12:42 am

JustinR wrote:
Wed Jan 02, 2019 11:00 pm
Also, I'm guessing many Boglehead millennials plan to FIRE, which makes SS even less relevant than it already is. (In two ways: further from retirement date, and less years worked meaning a smaller payout)
I disagree, it's very relevant to FIRE. The main way early retirement can fail is if the portfolio only lasts 25 years instead of the needed 50, at which point early retirees may end up in a low-wage job in old age. Being able to rely on an annuity kicking in the second half of retirement de-risks early retirement considerably.

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Re: Social Security for Millennials

Post by SoonerD » Thu Jan 03, 2019 12:44 am

willthrill81 wrote:
Wed Jan 02, 2019 10:36 pm
dh wrote:
Wed Aug 16, 2017 7:24 am
SS is the primary source of income for many in retirement, and that fact may increase unless we see the vast majority of American's really step up their savings.
You're conflating people on this forum with the general populace. For most Millennials on this forum, SS will very likely not be their primary source of income in retirement. But for the general populace, it likely will continue to be.
willthrill81, why do you think forum readers, of any generation, are not representative of the population at-large?

I see it a lot on whatever website forum I happen to be reading. The members think they are special just because they share the commonality of all reading MMM or early-retirement.com, etc. I don't buy the notion that because we have one common reading source we share common wealth, IQ, education, driving skills, physical health, etc. Please don't cite the occassional poll where some self-select to make a claim as to their income or net worth - we both know their not scientific polls and therefor of no value in determing income or wealth of readers.

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Re: Social Security for Millennials

Post by bluquark » Thu Jan 03, 2019 12:56 am

It's demonstrated by the choice of topics discussed and not discussed on the forum. The forum is full of questions about TLH, municipal bonds, luxury car purchases, and how to avoid tail risks that might threaten one's nest egg in the long term. There is much less discussion about how to stick to a spending budget or deal with credit card debt. What kind of demographic cares about the former topics but not the latter?

Let's put it this way, I doubt anybody has ever desired to learn about wash sale rules because of the subject's inherent appeal :)

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Re: Social Security for Millennials

Post by Fryxell » Thu Jan 03, 2019 3:24 am

:!:
pennstater2005 wrote:
Tue Apr 04, 2017 11:10 am
So I'm either Gen Y, X, Millennial, or a cusper. I'm so confused. I do factor SS into my retirement.
The Millennial and Gen-X cutoff is ill-defined. If it was based on the birthrate, millennials should’ve started in 1975-76, since that is when the birthrate started to increase after the baby bust.

I’m about your age and I like to call myself a Xennial. I relate with Gen-X on certain things and with Millennials on others. Xennials: https://en.m.wikipedia.org/wiki/Xennials

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Re: Social Security for Millennials

Post by Lancelot » Thu Jan 03, 2019 5:59 am

dh wrote:
Wed Aug 16, 2017 7:24 am
I am always surprised when I read that millennials don't believe social security will be there for them. It may be that many are excellent savers and see SS as "gravy" -- that may take away many irrational fears.

SS is the primary source of income for many in retirement, and that fact may increase unless we see the vast majority of American's really step up their savings. I see the "gravy" idea flipped 180 degrees, especially given the lack of pensions in America. Rather than fear for SS, I fear that many haven't saved enough in retirement plans (a dollop of gravy) to supplement their SS. Pensions are gone, people will rely on SS and their personal savings going forward.
I am a Baby Boomer and I remember many of my co workers opining that they would never receive a dime from SS- in the 1980s! Fast forward to now and I get it when Millennials are doubtful that they will ever receive funds from SS. Projecting 30 years out and I have no idea if SS will continue to exist. But human behavior is still the same and there will be folks that find them selves unprepared for retirement; therefore, I feel that some form of SS will in fact exist, modified of course for sustainability. FWIW, if I were a Millennial, I would probably be in the "I don't expect a dime" crowd. On the positive side, Millennials, as a whole, are far more retirement savy than Baby Boomers at an equivalent age. It's just the reality that DH stated "Pensions are gone" :D
No Where for Very Long...

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Re: Social Security for Millennials

Post by Grogs » Thu Jan 03, 2019 6:34 am

As luck would have it, I'll be 61 in 2034 if I'm still around. So my age group may be one of the first affected by the exhaustion of the trust fund. For planning purposes, I assume I'll get 75% of calculated SS benefits and then pay tax on 85% of the remainder. This reduces the net benefit to about 60% of the original calculated value.

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Re: Social Security for Millennials

Post by Valuethinker » Thu Jan 03, 2019 6:48 am

Lancelot wrote:
Thu Jan 03, 2019 5:59 am
dh wrote:
Wed Aug 16, 2017 7:24 am
I am always surprised when I read that millennials don't believe social security will be there for them. It may be that many are excellent savers and see SS as "gravy" -- that may take away many irrational fears.

SS is the primary source of income for many in retirement, and that fact may increase unless we see the vast majority of American's really step up their savings. I see the "gravy" idea flipped 180 degrees, especially given the lack of pensions in America. Rather than fear for SS, I fear that many haven't saved enough in retirement plans (a dollop of gravy) to supplement their SS. Pensions are gone, people will rely on SS and their personal savings going forward.
I am a Baby Boomer and I remember many of my co workers opining that they would never receive a dime from SS- in the 1980s! Fast forward to now and I get it when Millennials are doubtful that they will ever receive funds from SS. Projecting 30 years out and I have no idea if SS will continue to exist. But human behavior is still the same and there will be folks that find them selves unprepared for retirement; therefore, I feel that some form of SS will in fact exist, modified of course for sustainability. FWIW, if I were a Millennial, I would probably be in the "I don't expect a dime" crowd. On the positive side, Millennials, as a whole, are far more retirement savy than Baby Boomers at an equivalent age. It's just the reality that DH stated "Pensions are gone" :D
UK perspective here (with some North American insights).

I have to admit I don't experience the "Millennials" as more retirement savvy than I was at their age in the mid 1980s. Mostly they don't seem to have thought of it. They certainly don't value the pension plans (DC) their employers are now required to provide for them.

If they have any comment at all it is a sort of resigned "I will start saving after I have paid off my student loans and got my downpayment for a house, and that will be in my 40s, so I am going to be working forever". Our state pension is considerably less generous than US Social Security.

The difference is primarily that they have only seen bull markets in equities (with the occasional brutal bear) and thus are conditioned to expect that individual equity investments will provide them with enough retirement funds. They think equities produce reliable high returns. The 1970s is as ancient to them as the Tudor Kings and Queens, or the Second World War.

Thus the compulsory savings (4% of income) give them this "balance" that they get a statement for every year, but they think (generally) that that will be enough - whereas most modelling indicates they need to be saving 15-20% of gross income through their working lives to achieve a retirement income of 2/3rds of their pre retirement income.

The actual demographic case, in the US situation at least, is that the Millennials are probably OK. The Baby Boom has already turned at least 53, and increasing mortality is a feature going forward. In 20-30 years, the Baby Boomers are mostly out of the system - the oldest Baby Boomer in 2043 would be 98, and the youngest 78 -- the 5 years after that will see a very steep falloff in numbers.

US state provided pensions peaks, from memory, at 6.5% of GDP sometime in the 2040s. That's below where many western countries are *now*.

Sidebar on rising life expectancy

(When Social Security was created, the founders made some predictions about increasing life expectancy, and they were amazingly accurate. I think Roger Lowenstein chronicles that in his book).

There is a generation born roughly 1928-1945 that is just reaching the end of their lives. They may well turn out to have an anomalously long life expectancy:

- one thing which does increase your life expectancy is reduction in calorie intake (to a certain point) -- the scientific evidence points that way. If this takes place in childhood and adulthood it seems to have particularly good effects. Cue the Great Depression and wartime rationing - the average working class person probably ate *better* 1939-1949 than before (that's certainly true of the UK because it was a designed policy - food was in short supply, coming across the U Boat infested oceans of the world, and so things that were bad for you were strictly rationed - if your workforce is not properly fed, they cannot win you the war - this was the age of Total War**)

That generation just does not have the weight and diabetes problems of the successor generations. McDonald's was still an occasional treat, not the normal after school fare.

- conversely the privations of the Great Depression and wartime weeded out those who as vulnerable children could not survive them, mentally or physically. What we have now is a generation of survivors. That's going to be strongest in Russia, Germany, Japan, China etc - the places that survived the worst depredations. But it's also true of the UK and to an extent US Australia Canada

- the welfare state gave healthcare and pensions, universally, to this generation

- from memory the US Surgeon General's Report on smoking came out in the winter of 1963 or 1964. Something like 63% of American adults smoked - and the number fell by 10% in that winter. Now it's well less than 20%. It came early enough in the adult lives of the 1930-1945 generation to have a meaningful impact on health and life expectancy

** In the (tragically late) Helen Dunsmore's The Siege, about the siege of Leningrad in WW2, there's a scene, based on actual records, of a bureaucrat working out that if he increases the food intake of the civilian population in the besieged city from something like 875 to 945 calories a day, it increases the expected life enough for those civilians to work in the factories and defence construction, to justify the increase - a mathematically worked out calculation.

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Re: Social Security for Millennials

Post by UpperNwGuy » Thu Jan 03, 2019 7:36 am

Grogs wrote:
Thu Jan 03, 2019 6:34 am
As luck would have it, I'll be 61 in 2034 if I'm still around. So my age group may be one of the first affected by the exhaustion of the trust fund. For planning purposes, I assume I'll get 75% of calculated SS benefits and then pay tax on 85% of the remainder. This reduces the net benefit to about 60% of the original calculated value.
Actually, it could affect everyone drawing benefits in 2034, so it could affect people 100 years old in 2034 who have been receiving benefits for 35 years.

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Re: Social Security for Millennials

Post by AtlasShrugged? » Thu Jan 03, 2019 8:08 am

I thought the OP's post was most helpful. It laid out the math to make up the gap. To make this more actionable, it would good to understand how much we need to adjust our savings rate to make up for the future SSA shortfall, given a certain percent income replacement rate.

#Cruncher is needed, badly. I hope he responds with some nifty excel based tool.
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Re: Social Security for Millennials

Post by tim1999 » Thu Jan 03, 2019 8:23 am

For my own planning purposes I figure I will get something out of SS, but not until age 70+ and then probably 50-75% of the current full benefit.

are_cynic
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Re: Social Security for Millennials

Post by are_cynic » Thu Jan 03, 2019 8:31 am

I don't agree with assuming SS will be zero for Millenials. Insolvent does not mean gone- as has been stated upthread, SS payments can be cash flowed from current year taxes, just at a reduced rate.

If SS payments are higher than bargained for, effective tax rate will be undesirably elevated. Assuming no SS leads to an undue preference for pre-tax accounts.

I don't plan to take SS for another 40 years, but here is my plan- favor Roth accounts, both 401 and IRA, to minimize the convergence of SS payments and RMD's. Savings rate (as a percent of gross) is mid 20%. At my current income, Roth contributions neither bump me up a tax bracket (i.e. Trad contributions would not take me down a tax bracket) nor deprive me of tax credits at the lower end (i.e. I can't put enough in Trad to get me down to savers credits). In this neutral zone of the tax law, I don't consider this letting the tax tail wag the dog.

I use a stochastic spreadsheet that subjects my retirement portfolio drawdown plan to varying economic conditions- let CAGR vary between 0-5%, let SS solvency vary between 70-100%, and let lifespans vary between 70-100, and see if any of that makes me die broke. I'm not married to any one estimate and try to construct a plan that isn't fragile.
Last edited by are_cynic on Thu Jan 03, 2019 8:43 am, edited 2 times in total.
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Re: Social Security for Millennials

Post by Glockenspiel » Thu Jan 03, 2019 8:39 am

I've been saving so as to not expect anything, with any benefits I get being gravy/travel money.

ryman554
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Re: Social Security for Millennials

Post by ryman554 » Thu Jan 03, 2019 8:51 am

My very simple calculation focuses on generated income via pension(SS) and income I can safely draw on from my portfolio, using real dollars.

To make it even more simple, I assume that, for every year I do not take SS, I must have in "cash" (in this case, TIPS to keep them real).

I know my PIA (assuming no more work today, which is a bad assumption since I am in my prime earning years). I multiply that PIA by 0.7 and adjust for retirement at 62 or 70. (so I consider 2 cases, and 62 is past 2034). that is the income from SS. I know how many years I need in TIPS until I turn 62/70, so I know what kind of bolus of money is needed.

The remainder is my investment portfolio. Depending on how much I want to budget in a given year (bare minimum to fairly lavish), along with a initial withdrawal rate (ala tirnity study -- with a lower IWR for bare minimum and higher for lavish since I can cut back) I know what the portfolio value is needed to support the remaining income shortfall from SS/TIPS ladders. And so I can project what I need to save / if I am on track for saving reasonably easily. Right now the numbers look pretty good, but not great, for a comfortable, but not lavish, retirement, including a .7 reduction in SS.

All this is saying, if you do things based on income per year, and keep things in real dollars, the calculation to adjust for SS shortfall is fairly simple for rough tracking purposes.

As I near 60, or when I pull the ripcord on accumulating, I'll have to get a bit more thorough, but that's not for today.

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Re: Social Security for Millennials

Post by warner25 » Thu Jan 03, 2019 9:03 am

Valuethinker wrote:
Thu Jan 03, 2019 6:48 am
The actual demographic case, in the US situation at least, is that the Millennials are probably OK. The Baby Boom has already turned at least 53, and increasing mortality is a feature going forward. In 20-30 years, the Baby Boomers are mostly out of the system - the oldest Baby Boomer in 2043 would be 98, and the youngest 78 -- the 5 years after that will see a very steep falloff in numbers.
It was my understanding that the Millenial generation, as offspring of the Boomers, is actually the largest in American history. So the problem is that coupled with, so far, a low fertility rate among Millenials and slowing immigration, the demographics only get worse. No?

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Re: Social Security for Millennials

Post by Valuethinker » Thu Jan 03, 2019 9:33 am

warner25 wrote:
Thu Jan 03, 2019 9:03 am
Valuethinker wrote:
Thu Jan 03, 2019 6:48 am
The actual demographic case, in the US situation at least, is that the Millennials are probably OK. The Baby Boom has already turned at least 53, and increasing mortality is a feature going forward. In 20-30 years, the Baby Boomers are mostly out of the system - the oldest Baby Boomer in 2043 would be 98, and the youngest 78 -- the 5 years after that will see a very steep falloff in numbers.
It was my understanding that the Millenial generation, as offspring of the Boomers, is actually the largest in American history. So the problem is that coupled with, so far, a low fertility rate among Millenials and slowing immigration, the demographics only get worse. No?
The post 2008 situation of Millennials would give pause - a sharp drop in fertility. That may recover as the job and housing opportunities of Millennials recover ie not that there was a permanent shift in the Millennials v previous generations but rather a temporary one due to the extraordinary depth of the recession and extenuated nature of the recovery (10 years after the US economy hit bottom, I think we can fairly say that it only reached anything resembling full employment less than 18 months ago, and may not even be there now).

The usual problem with SS is posed as a bankruptcy of SS during the peak years of Baby Boomer retirement in the 2040s, given that the Generation X was smaller. That was the point I was addressing - the 70 per cent funding ratio is a "worst case" for the retired BBers.

Does the problem then get worse again as the Millennials retire? Demographics is relatively predictable (among economic variables) but not wholly so. We are then going to be in a world where robotics and Machine Learning/ Artificial Intelligence have had really profound effects on the organization of labour and production.

So I would have to pause at an assumption that "things only get worse". They definitely get better as the Boomers drop off the radar, whether they get worse again? I am not sure.

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indexmonkey
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Re: Social Security for Millennials

Post by indexmonkey » Thu Jan 03, 2019 9:35 am

I understand the dilemma moderators face on this subject. Much of SS discussion is not "actionable" and entails a lot of fortune telling. However, anticipating market returns is not actionable and is also fortune telling. SS plays a significant role in almost everyones retirement planning in some manner.

When I visit the SS site, it states in the years I am able to retire to project, if nothing is done, a 30% cut in benefits. So I plan for that, and hope we have the political courage to correct it. I do take into consideration there are essentially only three ways to remedy the problem, raise taxes, reduce benefits, or a combination.

I assume the worst, that we will do nothing and I will receive smaller benefits. But if taxes are raised on workers, and I dont take SS early, I may be affected as well. Pretty troubling.

Unlike many here, I have no pension, just savings like 401k and SS to "count on". I feel the only "actionable" way to address this is to assume, very conservatively that I will receive less, maybe far less and hope I am pleasantly surprised and just up the amount I am saving. For those in lower income brackets, I truly think it is a challenging planning issue.

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Carlos Danger
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Re: Social Security for Millennials

Post by Carlos Danger » Thu Jan 03, 2019 9:36 am

When did the change in generations occur? I WAS a Gen Xer, until someone decided I'm a millenial apparently?

I always though it was 15 year time periods

1945-1964 = Baby Boomers
1965-1984 = Gen X
1985-2004 = Millenials
2005-2024 = Gen Z


At any rate, whatever I am, I don't count on social security, and my personal political views do not favor increasing taxes to take care of future shortfalls. That being said, it will probably be fine and will probably be fixed by taxing people more. I'd guess first the elimination of the income cap for S.S. taxes without any corresponding increase to the benefits for those who end up paying more. And then if that isn't enough, raising the S.S. tax rate itself.

My personal view on potential social security benefits in retirement is that I will view anything I get as a nice surprise/bonus. I plan for our retirement with an assumption of zero social security benefit, extremely bearish assumptions w/r/t market returns over the next few decades, and with the assumption that we will need 100% of working years income in retirement. My worst case scenario barring societal collapse/Mad Max world is that we will have saved too much and enjoyed ourselves too little during working years.

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Re: Social Security for Millennials

Post by UpperNwGuy » Thu Jan 03, 2019 9:40 am

Gen X ends in 1980.

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Re: Social Security for Millennials

Post by DragonJoey3 » Thu Jan 03, 2019 9:42 am

I estimate I'll have several million in today's dollars by the time I'm eligible for social security, and I also intend to continue working until I'm physically unable to do so (which could be a while in my field of Computer Science). As such I don't really factor SS into my calculations at all, however I do assume that in the event my own projections fall short some manner of Social Security will be there to pick up the slack.

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Re: Social Security for Millennials

Post by willthrill81 » Thu Jan 03, 2019 11:53 am

SoonerD wrote:
Thu Jan 03, 2019 12:44 am
willthrill81 wrote:
Wed Jan 02, 2019 10:36 pm
dh wrote:
Wed Aug 16, 2017 7:24 am
SS is the primary source of income for many in retirement, and that fact may increase unless we see the vast majority of American's really step up their savings.
You're conflating people on this forum with the general populace. For most Millennials on this forum, SS will very likely not be their primary source of income in retirement. But for the general populace, it likely will continue to be.
willthrill81, why do you think forum readers, of any generation, are not representative of the population at-large?
Because the data clearly indicate that they aren't. Several surveys (here's one from 2015 where a sample of 1,382 members had an average net worth of about $2 million, and it's undoubtedly higher than that now due to the market runup since) of Bogleheads' financial status have been done, and they indicate that Bogleheads tend to have far greater net worth than the general population. Remember that the median net worth for 65-69 year olds in the U.S. is just $210k.

Those who are interested in their personal finances enough to frequent this forum are more likely to be high income earners, have a higher than average savings rate, etc. Consequently, they will be far less dependent on SS than the general populace.
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Re: Social Security for Millennials

Post by Whakamole » Thu Jan 03, 2019 12:56 pm

JustinR wrote:
Wed Jan 02, 2019 11:00 pm
Also, I'm guessing many Boglehead millennials plan to FIRE, which makes SS even less relevant than it already is. (In two ways: further from retirement date, and less years worked meaning a smaller payout)
Maybe? FIRE has been a big buzzword over the past few years, in large part due to a booming stock market, high salaries for techies due to competition, and a lot of blogs pushing the lifestyle. I'm GenX and remember similar talk - a kind of semi-retirement funded by day-trading dotcom stocks in the late 90s. That of course didn't last.

The "FI" part, I would agree with, but I think the idea (and appeal) of financial independence cuts across all generation labels on this forum.

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Re: Social Security for Millennials

Post by clip651 » Thu Jan 03, 2019 1:24 pm

willthrill81 wrote:
Thu Jan 03, 2019 11:53 am
SoonerD wrote:
Thu Jan 03, 2019 12:44 am
willthrill81 wrote:
Wed Jan 02, 2019 10:36 pm
dh wrote:
Wed Aug 16, 2017 7:24 am
SS is the primary source of income for many in retirement, and that fact may increase unless we see the vast majority of American's really step up their savings.
You're conflating people on this forum with the general populace. For most Millennials on this forum, SS will very likely not be their primary source of income in retirement. But for the general populace, it likely will continue to be.
willthrill81, why do you think forum readers, of any generation, are not representative of the population at-large?
Because the data clearly indicate that they aren't. Several surveys (here's one from 2015 where a sample of 1,382 members had an average net worth of about $2 million,
dh seems to be asking about readers of the forum. You (willthrill81) are asking about survey results from a small number of members that chose to answer a survey. The readership is much, much wider than that survey.

I'm not arguing that there aren't quite a few higher net worth folks that hang out here, either as posting members or readers. But that really doesn't tell you much about the overall readership. And even among members, plenty of folks post about opening their first IRA, choosing the brokerage for their first accounts, helping their retired parents figure out how to stretch small 6 figure portfolios, how to juggle loans and house down payment savings with starting to contribute to a 401k, etc.

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Re: Social Security for Millennials

Post by JoMoney » Thu Jan 03, 2019 1:30 pm

pennstater2005 wrote:
Tue Apr 04, 2017 10:19 am
Am I a millennial? I'm 38.
You're at the edge, as others noted a "cusper".
I might concede that if you're offended by being lumped in with "millennials" then maybe you're Gen-X... then again, being easily offended would be a very millennial trait :P :D :wink:
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Social Security for Millennials

Post by Walkure » Thu Jan 03, 2019 2:10 pm

Just a question here: was the "15-20% of income" rule of thumb originally based on a single-earner household? Just thinking that if I fund a 401(k) with 15% of my gross and DW funds with 15% of hers, we are still only saving 15% of household gross, but it's way higher as a function of our combined expenses - not everything doubles linearly, while most of the added costs of two working adults, e.g. commuting & childcare, fall away in the retirement years.

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