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The Covid-19 pandemic has prompted more Americans to wonder if Social Security will be there when they retire.
In a survey from Nationwide, 61% of adults of all generations said they are more worried now that Social Security will run out of funding.
The reults come as many respondents said the pandemic has them rethinking their own retirement. Of those surveyed, 38% said their plans have been affected, either because they will retire later than they thought, according to 19%, or they won’t be able to retire at all, 10%.
Recent research has pointed to quicker depletion of Social Security’s trust funds which help underpin the system. Notably, the agency will be able to continue to pay benefits, though on a smaller scale due to that projected shortfall.
“There’s a real tangible fear of the program running out funding during their lifetime or fearing that they’re not going to get out of it what they should in their retirement years,” said Tina Ambrozy, senior vice president of strategic customer solutions at Nationwide.
A majority of members of each generation surveyed said they believe cuts to Social Security benefits could happen under the current government administration. Millennials were most concerned, with 67%; followed by Generation X, with 61%; and baby boomers, 51%.
Americans agree Social Security needs to be fixed
Most members of each generation agree that Social Security should be changed. That includes 82% of millennials, 85% of Gen Xers and 80% of baby boomers.
The most popular idea with millennials, at 64%, was privatizing some of the benefits to let people invest the money on their own. Meanwhile, 61% of Gen Xers and 51% of baby boomers liked that idea.
Gen Xers were most in favor (70%) of applying annual cost of living increases to benefits only for low- and middle-income households. The survey found 62% of millennials and 63% of baby boomers wanted to see that change.
Baby boomers were also in favor of eliminating the payroll earnings cap so that more income would be taxed toward Social Security. While 63% of boomers favored that second idea, 60% of Gen Xers and 58% of millennials also agreed.
Many still need better understanding of claiming rules
Less than half of respondents from each generation said they were confident in their Social Security knowledge. Millennials were the most confident, with 44%; followed by Gen Xers, with 40% and baby boomers, 37%.
“There’s a lot of misconceptions and a lack of basic understanding around the benefits that is adding to a lot of the angst and fear and concern that people have,” Ambrozy said.
The biggest issue across all generations was not knowing the age at which they are eligible for full benefits. Of the respondents, 97% of millennials, 90% of Gen Xers and 80% of baby boomers incorrectly guessed their full retirement age.
Social Security is part of an overall retirement plan and can’t be the only retirement savings that folks have.
senior vice president of strategic customer solutions at Nationwide
Many respondents also indicated they incorrectly believe their benefits will still go up at full retirement age even if they claim Social Security early. (They won’t.) Only 69% of baby boomers, 49% of Gen Xers and 45% of millennials correctly identified that statement as false.
Meanwhile, about half or more of respondents said they didn’t know how much of their income will be replaced by Social Security when they retire.
Fewer than 1 in 10 adults know all the factors that determine how a maximum benefit is calculated.
Most are willing to do the work to come up with a plan
The survey did find that Americans across all generations are willing to brush up on their Social Security knowledge. Most adults who are either working with a financial advisor now or will work with one in the future said they plan to ask them about Social Security.
“It comes down to planning and preparation and education,” Ambrozy said of coming up with a retirement plan that includes a way to optimize Social Security benefits.
For most, the best way to come up with that plan is to meet with an advisor who can take into account all of their financial assets and goals, she said.
“Social Security is part of an overall retirement plan and can’t be the only retirement savings that folks have,” Ambrozy said.