If you're in your 20s, Social Security is something you probably don't spend much time thinking about. After all, at that stage of life, the concept of retirement may be totally foreign to you. And you may not want to spend your energy reading up on a program that may or may not be around by the time your career comes to an end.
But it's actually important to be knowledgeable about Social Security at any age, and that includes your 20s. Here are a few key things you ought to know.
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1. The program should still be there for you in retirement
You may have heard rumors that Social Security is going bankrupt, and that it won't be around for much longer. Well, thankfully, that's not the case.
It's true that Social Security is facing some financial challenges, and that it may need to cut benefits in roughly 10 years unless lawmakers find a way to pump more cash into the program. But you should also know that Social Security's main source of funding is payroll tax revenue. So as long as we have a workforce, the program can continue to run and pay benefits to some degree.
2. Your wages will affect your future benefits
You may be motivated to earn more money so you have an easier time paying your bills. But you should also be aware that Social Security benefits are calculated based on personal wages.
In fact, your future monthly benefit will be calculated based on your income during your 35 highest-paid years in the workforce. Knowing that might motivate you to build more skills and seek out raises during your career.
3. Your full retirement age might be different than where it stands today
Full retirement age (FRA) is when you're entitled to your complete monthly Social Security benefit based on your earnings history. If you're in your 20s, as of now, your FRA is age 67. In fact, that's FRA for anyone born in 1960 or later.
But as mentioned, lawmakers need to find a way to address Social Security's pending financial shortfall. One option is to push back FRA by a few years. So don't be surprised if the rules change down the line, and if you end up with a different FRA than what you have now.
Many people retire in conjunction with reaching FRA. So even though you may not be anywhere close to mapping out a retirement date, you may want to be aware of this potential change.
Social Security may not interest you all that much if you're in your 20s. But all this information is helpful to know. And remember, it's really never too early to start saving and planning for retirement, so don't let the fact that you're in your 20s keep you from focusing on your future to at least a modest degree. The more time you give yourself to save and invest for retirement, the more enjoyable that period of life might end up being for you.
