Young and middle aged adults are particularly pessimistic about the future of Social Security, but their greatest fears will likely never come to fruition. The Nationwide Retirement Institute’s 2021 Social Security Survey found that 71% of people worry Social Security will run out of funding in their lifetimes, while a considerable percentage of Millennials and Gen X-ers believe they’ll never receive “a dime” of benefits. But the 86-year-old program enjoys near-universal approval among Americans and is far more likely to be bolstered through legislation than to fail outright.
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The Nationwide survey, prepared by The Harris Poll, gathered responses from 1,931 adults ages 25 and older. The online survey found that 47% of Millennials and a third of Gen X-ers believe they’ll never receive any of Social Security benefits, compared to just 12% of Baby Boomers. Meanwhile, 83% of Gen X-ers and 77% of Millennials worry about Social Security running out of money during their lifetimes.
How Social Security Is Funded
The country’s Social Security program, which was founded in 1935, is funded primarily through federal payroll taxes. Interest that the pooled money generates and taxes that are levied on some benefits also help fund this massive program.
Yet, funding remains a key concern. The Social Security Administration’s Board of Trustees assesses the solvency of the program each year. The board’s most recent report from 2021 indicated the reserves of the Old-Age and Survivors Insurance (OASI), which pays retirement and survivors benefits, will be depleted by 2033. At that point, the ongoing collection of taxes will fund 76% of benefits, leaving a 24% funding gap. In addition, brand new analysis from the Congressional Budget Office (CBO) indicates the OASI trust fund would actually be depleted by 2032, a year later than its analysis from last year predicted.
Concerns from Millennials and Gen X-ers surrounding the program appear to be grounded in reality, but when you dig deeper you’ll see that everyone should probably rest easy.
Why You Shouldn’t Worry
Despite political divides running deeper than ever in the U.S., Americans remain highly supportive of Social Security. A recent AARP survey found that 96% of people said it was either the most important government program or an important one compared with other government programs.
The Nationwide Retirement Institute notes that Congress is likely to eventually pass amendments to address Social Security’s long-term funding shortfall. Legislative changes could include raising the age at which beneficiaries can begin to receive payments or increasing the payroll tax that pays for Social Security.
“Lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare,” the Social Security Administration Board of Trustees wrote in their 2020 report. “Taking action sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.”
As long as current workers continue to contribute via payroll taxes, the system won’t collapse. While that doesn’t mean the eventual funding gap should go unaddressed, it shows that prevailing fears that the program will go bankrupt are largely unfounded.
A significant portion of adults (71%) worry the Social Security program will run out of money during their lifetimes, a recent Nationwide Retirement Institute survey found. In fact, nearly half of Millennials and a third of Gen X-ers believe they’ll never see any of their Social Security benefits. But the safety net program remains extremely popular, and as a result, Congress will likely address these concerns. Although the trust fund reserves are scheduled to be depleted by 2033 or 2032 (if you ask the CBO), continuing taxes will pay for 76% of scheduled benefits. Lawmakers will have to increase taxes or make adjustments to the program to keep it fully funded.
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- Social Security is an important component of many Americans’ retirement plans, but do you know how much your benefits will be? SmartAsset’s free Social Security calculator can tell you how much you can expect to collect based on your current age, income and planned retirement age.
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