What population group will suffer the most if the federal government does not address the shortfall in the Social Security Trust Fund for retirees?
The answer, not surprisingly, is millennials because they will be collecting smaller payouts for longer, according to a new report from the Employee Benefit Research Institute (EBRI). The oldest age group would suffer the least.
The Social Security trust fund is on track to deplete its reserves by 2034, which would mean a 23% benefit cut if nothing is done to shore up reserves, restructure benefits or both.
Individuals ages 35 to 39, who are among the oldest millennials, will have to save an additional $58,000 in their retirement funds by the time they reach 65 to make up for the pro rata cuts in Social Security benefits, according to EBRI’s baseline scenario. Their retirement savings deficit would be 17% larger than more recent EBRI projections. Both retirement shortfalls are based on present values, in 2019 dollars, at age 65. (EBRI’s analysis does not include population groups under age 35).
Those between 60 and 64 would be short $44,000, and their deficit would be less than 1% greater compared with current projections.
The EBRI baseline scenario assumes that a population group draws Social Security benefits and any defined benefit plan benefits at age 65 along with payouts from individual retirement accounts, including IRAs and DC plans, if expenses exceed after-tax annual income from Social Security and defined benefit plans.