Retirement expert says young workers have time to prepare despite concerns about Social Security running out of funding in their lifetime.

Recent data from the Nationwide Retirement Institute shows that around 40% of millennials and Gen Zers worry that the U.S.'s Social Security program may run out of funding in their lifetimes, and about the same percentage believe they "won't get a dime" of Social Security benefits.

Although the Social Security Administration's trust funds may deplete by 2035, this does not imply that eligible beneficiaries will cease receiving payments entirely.

A guide to understanding Social Security benefits and preparing for a possible decrease in monthly payments.

What's happening with Social Security now

The government established Social Security in 1935 as a program that offers a portion of income to eligible recipients who are unable to work.

"According to Anne Lester, a retirement expert and author of "Your Best Financial Life," the program was intended as an insurance policy against extreme poverty, not to replace all income."

Payroll taxes, paid by both employees and employers, fund a general pot used to pay out benefits to current recipients, including retirement benefits that aim to replace a portion of pre-retirement income.

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The average monthly retirement benefit in July was approximately $1,871, but the amount of your retirement benefit is determined by your earnings during your working years.

The Social Security Administration has around $2.8 trillion in trust fund reserves, but this reserve is expected to be depleted in 2035 unless federal lawmakers intervene.

"Lester expresses concern that excessive pessimism about Social Security discourages people from contacting their congressperson, but he believes that addressing the issue in the short term will ultimately benefit everyone in the long run."

The SSA's annual trustees' report states that Social Security benefits will only be able to pay out around 83% of recipients' monthly benefits if nothing is done.

How young people can plan ahead for retirement

Lester advises younger generations not to worry excessively about the Social Security trust funds becoming insolvent by 2035.

"Even if we reach our destination, we won't run out of money completely, but we may not receive the full amount we expected, which is not ideal, but it won't be zero."

Lester states that individuals in their 20s and 30s have ample time to prepare for retirement without having to drastically alter their saving strategy.

Supplemental retirement income is the purpose of Social Security benefits, which are intended to be combined with other sources of retirement funds, such as 401(k) withdrawals or individual retirement accounts.

Lester suggests that young workers can prepare for a potentially reduced Social Security benefit in the future by slightly increasing their contributions to their other retirement savings accounts.

"To address the concern of a smaller Social Security payout in your 20s, it is rational to save a little more. However, it is not necessary to save hundreds or thousands of dollars a year more. Instead, saving 1% or 2% more each year can help close the gap."

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