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If you're banking on Social Security to fund your retirement, you may want to think twice.
A new forecast from the Social Security Administration shows that Social Security trust funds will be depleted by 2034, a year sooner than initially forecast. At this time, you'll only be able to receive 81% of your benefits, reducing the amount you'll get paid.
As a personal finance expert who saved enough to retire comfortably at 40, I've worked with dozens of clients to help them calculate how much they need to save now to afford retirement. Whether Social Security is reduced or eliminated, I can tell you with confidence that you shouldn't rely on this program to fully fund your future expenses.
The monthly payments you'll receive from Social Security aren't enough to cover most of your expenses -- and these payments are only expected to decrease. Here's how Social Security benefits work and how to plan for your retirement without relying on this program's future.
Read more: Social Security 2025: What Goes Into Determining Your Monthly Payment and How to Maximize It
How do Social Security earnings work?
Social Security is a government-run program we pay into through our payroll taxes -- employees pay 6.2%, employers pay 6.2% and self-employed individuals pay the full 12.4%.
The money you pay in Social Security payroll taxes goes directly to current beneficiaries rather than into a personal savings account for you. So what you're paying now is for the generation before you and you will be paid out based on what the next generation puts into the pool of money.
How much you'll receive from Social Security depends on whether you're single or married, how much you earned over your 35 highest-earning years and the age you are when you retire. Most people can start claiming benefits at 62 but the longer you wait, the more your monthly payout could be. You can use the Social Security benefits calculator to estimate what you're expected to receive.
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