Social Security has been a hot topic recently, with many Americans worried about the future of their benefits. A recent study found that 72% of adults fear Social Security will run out of funding in their lifetimes, with this concern being particularly high among Millennials and Gen Xers. Additionally, 23% of respondents do not expect to receive any benefits at all.
The pessimism surrounding Social Security comes amidst uncertainty about the program’s future funding status. The trust fund that pays retirement benefits is projected to run short by 2033, at which point only 79% of benefits will be payable unless changes are made. Despite widespread concerns, experts believe that fears of Social Security benefits disappearing completely are overblown.
David Blanchett, managing director and head of retirement research at PGIM DC Solutions, said, “The odds of [Social Security] going away completely are really, really low.” However, he noted the possibility that benefits could be rearranged, potentially reducing income replacement rates for high earners. Joe Elsasser, a certified financial planner and president of Social Security claiming software company Covisum, echoed this sentiment, saying, “It’s totally reasonable to expect a benefit cut for younger people. But to plan for it not to be there at all is a poor assumption.”
Nationwide’s survey also highlighted a significant gap in understanding how Social Security works.
Over half of respondents—51%—do not know how to maximize their Social Security benefits, and 33% are uncertain when they qualify for full retirement benefits.
Americans’ worries over Social Security
Social Security retirement benefits are calculated based on the top 35 years of wages that are averaged to determine the benefit amount.
Beneficiaries can claim retirement benefits as early as age 62, but at a permanently reduced rate. Waiting until the full retirement age—66 to 67, depending on birth year—yields 100% of the benefits earned. Waiting until age 70 maximizes the benefit potential.
However, experts caution that waiting until age 70 is not the optimal strategy for everyone. Consulting a financial professional to assess Social Security claiming options is highly recommended. Many Americans are entering retirement with insufficient savings, raising concerns over the stability of future retirees’ financial well-being.
Despite potential shortfalls in retirement savings, Social Security is expected to play a crucial role in preventing worst-case scenarios. “If we didn’t have Social Security benefits, we would have a crisis where we’d have people retire, they’d be destitute, they’d be in a lot of trouble,” Blanchett said. For many, Social Security will remain a vital part of their retirement planning, even amid concerns about its future.
