Social Security’s Funding Challenges
Every paycheck you earn contributes to Social Security taxes with a promise: support the program now, and it will provide income upon retirement. However, recent projections suggest a substantial funding gap in Social Security. The retirement trust fund could exhaust its reserves by 2032, long before most Gen Z members retire. While this doesn’t mean Social Security will disappear or stop sending checks, benefits might be cut significantly unless Congress intervenes, according to experts.
“Gen Z shouldn’t plan on Social Security disappearing,” Michael Ryan, finance expert and founder of MichaelRyanMoney.com, told Newsweek. “The more realistic risk is a smaller benefit, a later benefit, higher taxes to preserve benefits, or some combination of those changes.”
For young Americans, it’s likely Social Security will provide some retirement income, but potentially less than current law promises. The eventual size of checks will depend on congressional actions over the coming decades.
Why It Matters
Gen Z workers are currently financing benefits for retirees. Starting in 2026, employees pay a 6.2% Social Security tax on earnings up to $184,500, while employers match it. Self-employed workers pay the combined 12.4% rate. Social Security operates mainly as a pay-as-you-go system; taxes from workers and employers pay current benefits, with any surplus held in trust funds. Today’s demographic challenge arises as the number of beneficiaries grows faster than the supporting workforce.
“For Gen Z, the scarier problem is the uncertainty stretching across an entire working lifetime. Someone in their 20s may spend four decades making retirement decisions around a program whose taxes, retirement age, or benefit formula could change several times before they collect,” Ryan said.
The Distinction Between Scheduled and Payable Benefits
In 2032, payroll taxes aren’t set to disappear and Social Security won’t automatically end. Even if Congress doesn’t act, incoming revenue can continue to pay most, but not all, scheduled benefits.
“The nightmare isn’t necessarily that Social Security disappears,” Ryan stated. “It’s that you spend 40 years planning around a promise while nobody can tell you exactly what that promise will eventually be worth.”
Scheduled benefits are those promised under current law, whereas payable benefits are what the program can finance with available revenue. Under projections from the 2026 Trustees Report, Social Security might pay 83% of scheduled benefits.
“Gen Z should not view the 83% projection as a confirmed 17% cut to every future check. Congress could raise revenue or modify benefits before the reserves are depleted,” experts say.
Preparing for Potential Changes
Changes to Social Security are expected to ensure its continuity, but they come with trade-offs. Possibilities include higher payroll taxes, changes to taxable earnings, benefit formula adjustments, and altered retirement ages.
Kevin Thompson, CEO of 9i Capital Group, notes potential increases in the full retirement age and a rise in payroll taxes.
“Gen Z could be left shouldering a significant burden. They are already dealing with higher college costs, difficulty affording homes, and potentially higher taxes in the future,” he told Newsweek.
“On top of that, we could eventually see the full retirement age pushed from 67 to 70,” Thompson added.
Lawmakers must act promptly to phase in changes gradually and provide younger workers time to adjust.
Planning for Retirement Without Abandoning Social Security
Finance experts advise Gen Z to consider Social Security as just one layer of retirement income.
“Gen Z will still have Social Security, but it could look very different than it does now,” Drew Powers, founder of Powers Financial Group, told Newsweek.
Building an emergency fund and setting aside a portion of each paycheck can provide a steady cushion for retirement.
Starting Early to Build Retirement Savings
Starting early may be a significant advantage for Gen Z’s retirement planning. Investing $250 monthly from age 22 through 67, with a hypothetical 6% annual return, could result in a balance of approximately $735,000.
According to the Bureau of Labor Statistics, Americans aged 65 and older spend about $61,400 annually on average. A $735,000 retirement savings balance could fund roughly 12 years of average retiree spending.
“I advise Millennials and Gen Z to strongly consider investing more in other retirement products like a 401k or Roth IRA to make up some of the financial gap that could come if Social Security benefits are reduced,” said Alex Beene, a financial literacy instructor.
Gen Z workers should plan for Social Security to provide some income, but they may not receive every dollar scheduled today.
“Social Security is too beloved to dismantle completely, but anyone currently under 40 should expect a different retirement experience than their parents and grandparents enjoy,” Powers concluded.
What’s Next?
Congress has yet to enact laws addressing the projected shortfall in the 2026 Trustees Report.
For Gen Z, Social Security isn’t simply set to vanish, but full scheduled benefits aren’t guaranteed either. Experts recommend younger workers plan around this uncertainty by saving early and treating Social Security as a supplement to personal retirement savings.
“This could force many younger Americans to work longer to receive their full benefits at a time when many of their jobs are also being automated at a rapid pace,” Thompson remarked.
Contact Newsweek editors on this story: Jason Lemon and Gray R. Thomas