Social Security’s future worries most Americans, survey reveals

A significant portion of Americans are increasingly worried about the solvency of the Social Security system. The survey reveals that 72% of adults fear that the Social Security system will run out of funding within their lifetime. This concern is more pronounced among millennials (79%) and Gen Xers (77%), compared to Gen Z (66%) and baby boomers (66%). Alarmingly, nearly one in four (23%) believe they will not receive any of the Social Security benefits they have earned.

The anxiety surrounding Social Security is influencing political behavior, with 69% of respondents stating that a candidate's stance on Social Security reform will be a major factor in how they vote. This underscores the critical importance of Social Security in the political landscape and the urgency for policymakers to address these concerns.

The survey identifies several key reforms that Americans support to ensure the sustainability of the Social Security system:

• Raising the minimum eligibility age: 66% of respondents support raising the minimum eligibility age from 62 to 64 for all future retirees age 50 or younger.
• Increasing the full retirement age: 51% favor increasing the full retirement age from 67 to 69 for all future retirees age 50 or younger.
• Increasing taxes on higher earners: 47% support increasing taxes on higher earners to boost funding for Social Security.
• Decreasing taxation on benefits: 40% of respondents favor decreasing the taxation on Social Security benefits.
• Increased funding through employer taxes: 34% support increasing funding through employer taxes.

These proposals have bipartisan support, with 68% of Democrats and 69% of Republicans backing the increase in the minimum eligibility age, and 50% and 51%, respectively, favoring the increase in the full retirement age.

Despite widespread concerns about Social Security, many Americans lack a comprehensive understanding of how the system works. More than half of the respondents (51%) are unaware of how to maximize their Social Security benefits, and 33% are unclear about when they will qualify for full retirement benefits. This knowledge gap highlights the need for better education and guidance on Social Security.

Financial professionals play a crucial role in helping individuals navigate the complexities of Social Security. The survey found that more adults are seeking advice from financial professionals about Social Security today than in previous years. Over half (53%) of adults now say their financial professional provides advice on how and when to file for Social Security benefits, up from 35% in 2014. Additionally, 43% of adults with a financial professional now expect them to provide Social Security advice, a significant increase from 29% in 2014.

The survey reveals notable differences in how various generations view and plan for Social Security:

Younger generations (Gen Z and millennials)

• Pessimism about future benefits. About two-fifths of Gen Z (45%) and millennials (39%) believe they will not receive any Social Security benefits they have earned.
• Proactive planning. Despite their pessimism, younger generations are more likely to take proactive steps to plan for their financial future. Many are turning to financial professionals for guidance on Social Security strategies.

Older generations (Gen X and boomers)

• Increased reliance on Social Security. A significant number of adults age 50 and over worry that Social Security will run out of funding in their lifetime, with 75% expressing this concern, up from 66% in 2014.
• Lack of additional retirement income. One in five adults age 50 and over say they have no source of retirement income other than Social Security, up from 13% in 2014.
• Shift in retirement planning. Compared to a decade ago, fewer Americans have pensions in addition to Social Security, with only 31% having a pension in 2023, down from 48% in 2014.

The survey underscores the economic implications of the current Social Security funding formula. Social Security is primarily financed through a dedicated payroll tax, along with taxes on some recipients' benefits and interest earned on the pool of money. Due to increased longevity and a decrease in the number of workers per beneficiary, Social Security began tapping into its surplus fund in 2021 to meet its obligations. If no changes are made, the surplus fund is projected to be depleted by 2033, at which point beneficiaries would begin receiving reduced benefits.

To address the funding shortfalls, the survey suggests several actionable steps individuals can take:

• Understand essential income needs. Use a retirement income worksheet to determine essential income needs during retirement.
• Plan for reduced benefits. Save in taxable, tax-deferred and tax-free accounts to have the flexibility to minimize taxes in retirement.
• Maximize employer-sponsored plans. Take advantage of any employer-sponsored plans and contribute at a level that maximizes available employer matching dollars.

The Nationwide Retirement Institute's 2024 Social Security Survey highlights the growing concerns among Americans about the future of Social Security and the urgent need for reforms. With a significant portion of the population fearing the depletion of Social Security funds within their lifetime, it is crucial for individuals to educate themselves and seek guidance from financial professionals to navigate the complexities of the system. By understanding the proposed reforms and taking proactive steps to plan for retirement, Americans can build long-term financial resilience and ensure a more secure future.