62 KIPLINGER’S PERSONAL FINANCE^ 04/2020
young clients to take a similar tack:
Expect Social Security to be around,
but plan for retirement as though it
won’t. “If you can take care of yourself
with your own investments, the rest is
icing on the cake,” says Tara Tussing
Unverzagt, a certified financial planner
and president of South Bay Financial
Partners in Torrance, Calif.
Still, given that Social Security
isn’t going to vanish, it’s reasonable
to include it as you put together a
retirement plan. At http://www.ssa.gov/
myaccount, you can sign up for an
account. After you’ve logged in, you’ll
see your estimated monthly retire-
ment benefits, which vary depending
on the age you start taking them (for
more, see “Your Social Security Ques-
tions Answered,” March). Keep
in mind that your estimates
will likely change over time
along with your earnings
and the policies regard-
ing Social Security.
To be conservative,
you could assume a
20% cut to your es-
timated benefit to
account for the pos-
sibility that just 80%
of benefits will be
paid if Social Secu-
rity’s trust fund
is depleted. For
clients who are
especially worried,
CFP Kaleb Paddock,
founder of Ten Tal-
ents Financial Plan-
ning in Parker, Colo.,
assumes a reduction
of as much as 50%. ■Can You Count on Social Security?
A
t some point in my young adult-
hood, I became aware that many
millennials were skeptical that
Social Security would still be paying
benefits by the time we retire. Curious
whether that sentiment still stands, I
recently posted to my Facebook page
to ask my generational cohorts whether
they’ve absorbed a similar message
and how they’re incorporating Social
Security into their retirement plans.
Many respondents said that they
aren’t counting on Social Security to
be around in a few decades and that
to stay af loat, they expect to tap their
own investments in 401(k)s and IRAs,
brokerage accounts, and real estate.
In reality, Social Security is not
doomed. Much of the anxiety surround-
ing its future stems from projections
that if Congress takes no action, Social
Security’s trust fund will run out of
money in 2035. But even if that happens,
Social Security will be on track to pay
out 80% of scheduled benefits from
payroll taxes. What’s more, lawmakers
are likely to shore up
the program, although
it may be at the last
minute. Strategies may
include increasing the
percentage taken out
of workers’ checks for
Social Security payroll
taxes—currently, it’s
6.2% for employees—or
boosting the amount of income subject
to payroll taxes. Other ideas include
raising the age of full retirement (cur-
rently, it’s 67 for anyone born in 1960
or later) and changing cost-of-living
adjustments so that they result in
smaller benefit increases.
That’s reassuring for millennials who
struggle to save for retirement. As one
of the commenters on my Facebook
post pointed out, financially strappedmillennials who are carrying heavy
student debt and putting off home-
ownership don’t have much choice
but to bank on Social Security.Shaping your retirement plan. Like
some of my friends, I don’t give
income from Social Security much
weight in my retirement planning.
I think that benefits will be available
in some form, but I’d rather not rely
on them for the bulk of my income.
For someone who claims Social Se-
curity at full retirement age and had
average earnings, benefits replace
only about 40% of preretirement in-
come. The percentage drops to about
27% for high earners; it can be as high
as 75% for very low earners. I’m un-
usual for someone my age because
my husband and I are hoping to
collect a pension as retirees—
he’s in the military and will
receive a pension if he com-
pletes 20 years of service.
But we’re also squirrelingaway money in tax-
advantaged retire-
ment accounts and
our brokerage
account.
For stability
and peace of
mind, some
financial
planners
counselMILLENNIAL MONEY Lisa Gerstner
POON WATCHARA-AMPHAIWANI THINK BENEFITS WILL BE
AVAILABLE IN SOME FORM,
BUT I’M NOT RELYING ON THEM
FOR THE BULK OF MY INCOME.FUNDAMENTALS^ CommentaryTO SHARE THIS COLUMN, PLEASE
GO TO KIPLINGER.COM/LINKS/
MILLENNIALS. YOU CAN CONTACT
THE AUTHOR AT LISA_GERSTNER@
KIPLINGER.COM.