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No wonder Americans are so worried about retirement. A new survey shows 80% of them are planning to rely on Social Security benefits “substantially” or “somewhat” in retirement (or already do so). But only 42% are “very” or “somewhat” confident in the program’s future.
Compounding this uncertainty: widespread confusion about what the looming exhaustion of the Social Security Trust funds really means. According to the Social Security Trustees’ most recent projections issued last month, the combined trust funds (those paying for both old age and disability benefits) will be exhausted in 2034, at which point Social Security taxes coming into the Treasury will be enough to pay only 79% of promised benefits. Yet 19% of those surveyed thought Social Security would be unable to pay any benefits at all after trust fund exhaustion and 54% admitted they had no idea what the impact would be. Just 26% knew that the program would be able to pay some, but not all, benefits.
The survey of 1,200 adults (including 483 who are already retired) was commissioned by AARP, the 38 million member seniors’ lobby, to mark the 80th anniversary of the retirement program, which President Franklin D. Roosevelt signed into law on August 14th, 1935. It was conducted for AARP in June via phone by GfK Roper Public Affairs.
AARP asked some of the same questions on Social Security’s 60th, 70th and 75th anniversaries, providing points of comparison. For example, in its surveys, confidence in Social Security reached a low in 2010, when only 35% said they were very or somewhat confident in its future.
"" frameborder="0" marginwidth="0" marginheight="0" scrolling="no" style="border: 0px currentColor; border-image: none; vertical-align: bottom;">"" frameborder="0" marginwidth="0" marginheight="0" scrolling="no" style="border: 0px currentColor; border-image: none; vertical-align: bottom; display: none; visibility: hidden;">Along with confidence, support for tax increases to support the program has risen. In the current survey, 68% of still working adults agreed somewhat or completely with the statement: “I would be willing to contribute more to Social Security to make sure it will be there for me when I retire.” That’s up from 60% in 2010 and 54% in 2005.
One notable change is in the percentage of young adults who expect to rely “substantially” or “somewhat” on Social Security during their own retirements. In the current survey, 75% of those aged 18 to 29 said they expected to rely on the government program, up from 62% in 2010. That mimics the results of an April poll by Gallup, which found that the share of young workers saying Social Security will be a big part of their retirement income has doubled over the past decade.But—and here’s that disconnect again—young people saying they expect to rely on Social Security isn’t the same thing as being confident it will be there for them. Some 55% of those aged 18 to 29 agreed completely or somewhat with the statement “Social Security won’t be there when I’m ready to retire.” Still, they’re not ready to abandon the program; 81% of young adults said they’d be willing to pay more to make sure it is there for them.
Intriguingly, the youngest adults are more supportive of Social Security and more confident in its future than those in their prime earning years of 30 to 49. Only 68% of that older group said they’d be willing to pay more to assure their own benefits and 65% agreed completely or somewhat with the statement that Social Security won’t be there for them when they retire.
There’s no good actuarial reason overall confidence in the program should be rising— Congress has done nothing to address the looming shortfall even as it has grown nearer. But it may reflect the changing political atmosphere around the program, which has enjoyed increased Republican support since 2005-2006, when a newly elected President George W. Bush spent some of his “political capital” on an unsuccessful campaign to partially privatize Social Security. The fact that those now under 29 likely paid little attention to the debate over the Bush proposal might explain, in part, their greater support for and confidence in Social Security than found among 30 to 49 year olds..
So just how much more would workers have to pay to bring the Social Security program back into actuarial balance? Currently, the Boston College Center for Retirement Research notes, Social Security’s long run-deficit equals 2.68% of covered payroll earnings, which means that taxes would have to be raised by that amount now—with a 1.34% hike on workers and 1.34% on employers—to pay all the promised benefits until 2089. Workers and employers now each pay a 6.2% tax on salary up to $118,500. Mainstream proposals to bring the program back into balance wouldn’t rely entirely on a percentage tax increase, however. Instead, they would combine a smaller percentage increase with an increase in the amount of salary that is taxed and benefit cuts, such as a later retirement age and lower inflation adjustments.