Social Security Advice For Most Millennials

As a 29 year old with a niche knowledge in Social Security and retirement planning, I find a majority of the articles written about Social Security for my generation to be amusing. Whether it's 30 year financial forecasts, political policies, lower forward-earning stock market projections, or (my favorite) even polling millennials themselves about their views on the sustainability of the Social Security benefits program, I think the authors of these types of articles and discussions miss in their attempts to make the topic of Social Security meaningful for most individuals in their 20's and 30's. 

I don't have empirical evidence, but I have a strong feeling that most Millennials don't have a great understanding of what Social Security is outside of some money that comes out of their paycheck that will one day turn into a monthly check when they get ready to retire. A majority of us surely aren't thumbing through the newest 269 page 2017 Social Security Annual Report looking for reinforcements on our views about sustainability of the Social Security program. Case in point, when I tell friends my age that I help people with Social Security their eyes glaze over and we move on to the next topic. 

With that said, I believe there are a few practical discussions that Millennials can enter into within the realm of Social Security that don't rely on an abundance of speculative 30 year projections. If someone were to ask me what a Millennial should know about Social Security I would talk about the following areas:

1. Social Security 101

I would start with a reminder that the Social Security program is a federal insurance program that you're required to pay into your entire working life. Based on how much you pay in over your working career, Social Security will mail you a check every month for the rest of your life until you die.

Terry has worked for 35 years as an engineer at an higher than average salary than his peers. Terry is now 67 and would like to retire and start his Social Security benefits. Terry files for his age 67 Social Security benefits and three months later he begins receiving $2,300 per month. He will receive this amount every month for the rest of his life.  
Additional Note: When Terry dies, his wife will actually start receiving his $2,300 per month benefit for the rest of her life

Social Security is the average American's greatest protection from their greatest financial fear - living too long and running out of money.  You might not realize it yet, but your Social Security benefit will likely be the best retirement asset you have. It's why older people care and talk about it so much. You don't have to learn everything now, but over time you would be wise to begin learning how the benefits program works. As a first step, you might consider creating an account on and viewing your current Social Security benefit statement online. 


2. The Blackout Period

The Blackout Period is arguably the most important and practical reason I would bring up the topic of Social Security planning with a millennial who is married and has children (or one on the way). As mentioned above, Social Security helps guard against retirees' greatest fear of not having enough money for retirement. Social Security can actually help provide some cushioning against one of your greatest fears as a spouse and parent - dying unexpectedly and your family not having enough money to live off. 

Even though you're not in your 60's, there's a special rule that exists within Social Security that says if you die and you have children below the age of 18, Social Security will pay a monthly benefit to your spouse and a monthly benefit to each of your children until they reach age 18.  Once your youngest child turns 18, your spouse will also no longer receive a monthly check from Social Security, and won't be eligible to receive it again until they are at least 60. This period where no Social Security benefits can be paid out to your family is commonly known as the Blackout Period. 

Bob (34) is an engineer and married to Jane (32) who doesn't work and takes care of their two children - ages 5 and 1.  
Bob knows from looking at his Social Security statement that he will receive $2,300 /mo if he files at age 67. 
Bob also knows that if he were to die today, Jane would receive $2,100 /mo until their youngest child turns 18. 
His children would also each receive a monthly check that would total together to be about $1,500 /mo

In summary, if Bob were to die today:
From now until Jane turns 49, his family would receive about $3,600 / month from Social Security. 
Jane will receive no Social Security money from age 49 until at least age 60. [Blackout Period]

While Social Security may not be a front-of-mind issue now, the above example will likely springboard a millennial to begin thinking about whether or not their family would be adequately covered if something were to happen to them. I would bet if I met Bob in real life, he wouldn't realize he had a $3,600/mo benefit for his family for 17 years. I also bet he would be much more receptive to having a discussion on whether his current life insurance coverage is enough (or maybe too much) with the new information. Effectively, Social Security becomes a springboard topic to having the term life insurance conversation that most millennials can be underinsured in. 

The financial planning application points of the Blackout Period can manifest in several ways, but leaving it absent in an article about Social Security for people in their 20's and 30's seems negligent. 

3. Your Career Affects Your Social Security Benefits

Without diving into the details of how Social Security benefits are calculated, you need to know that Social Security wasn't designed to treat everyone equally at retirement. Individuals who earn less money over a lifetime career will receive a higher percentage of their pre-retirement income than those who were above average income workers. Said another way, the individuals who pay the most into Social Security get the least out of it, relatively speaking.

The application point here is that if you're a high-income young professional (ie. physician, attorney, pilot, engineer, business owner, etc) don't count on Social Security replacing a large percentage of the income you're enjoying now. As a high-earner, you have the additional responsibility to save a higher percentage of your working income than the average American (while paying more in taxes to Social Security along the way). 

4. How To Plan In Light of Uncertainty

Any Social Security plans you make today as a millennial are plans made in sand. It only takes one budget cut, economic event, or unexpected life event to send you back to the drawing board to start all over again. I wouldn't spend too much time in your 20's and 30's thinking about Social Security outside of the Blackout Period scenario above. However, I would concentrate on the things you can control:

  • Your production level at work, increasing your future earnings potential (human capital)
  • Figuring out ways to increase your household savings rate
  • Identifying your biggest financial threats (dying, disability, liability) and making sure they're covered
  • Coming up with a plan to pay off high interests debt efficiently (like student loans)
  • Getting your company match in your retirement plan and investing it appropriately to your time horizon
  • Not living above your means

If you get these things right, more than likely you'll be prepared for whatever the 2047 Social Security Annual Report will say.