Americans fear Social Security will go broke, poll shows

The prospect of Social Security running out of money in their lifetimes haunts the vast majority of Americans over age 50. More than three-quarters (78 percent) of future retirees in that age group and almost two-thirds (63 percent) of those who retired in the past 10 years share that concern. These are just two of the key findings of a recent poll conducted by the Nationwide Retirement Institute (NRI).

Here's another major worry: Nearly two-thirds (63 percent) of future and recent retirees are concerned about cuts to Social Security under the Trump administration. This is so despite President Donald Trump's promise on the campaign trail that he wouldn't cut Social Security benefits.

But that doesn't mean all these people think the current situation is just fine. More than four in five future retirees (82 percent) and 79 percent of recent retirees believe Social Security needs to change. And almost two-thirds of these groups cite the need for increased funding as Social Security's biggest problem.

It should be no surprise that future and recent retirees are concerned about Social Security's funding, given its trustees' annual ritual of publicizing the year when the program's fund will be exhausted. (According to the most recent trustee report, that year is 2034.) 

Many people think they'll receive nothing from Social Security if the trust fund is exhausted, but that's not true. The latest report points out that if the trust fund is exhausted and Congress doesn't intervene to shore up the system's finances, retirees would still receive about three-fourths of their benefits. These benefits would be financed by the FICA taxes current workers pay in 2034 and beyond.

Of course, getting hit with a 25 percent cut in benefits would be bad news to older workers and recent retirees who can't afford any reduction in their income. According to recent Social Security data, income from the program represents more than half of total income for almost two-thirds of  recipients. For more than one-third of these people, Social Security income represents more than 90 percent of total income. 

Given the importance of Social Security benefits, it's no wonder that older workers and retirees are so concerned about the program's funding problems.

Most future and recent retirees said funding Social Security should be a shared responsibility among employees, employers and the federal government. The fact is, however, Social Security is funded with FICA taxes paid by employees and employers -- not the federal government.

The recent NRI poll shows that Social Security's funding situation might influence the claiming decision for at least some future retirees. While fewer than one-third of this group plan to start Social Security before their full retirement age, of those who will, 17 percent cited their belief that Social Security won't be around at their full retirement age. That's a shame because delaying Social Security benefits is one of the best ways to increase the amount of benefits paid over your lifetime.

Only about one-quarter of future retirees and recent retirees said the full retirement age should be increased, which is one of the most common suggestions to help contain Social Security benefits.

The last time Social Security had a funding crisis, in 1983, Republican President Ronald Reagan, a Democratic House and a Republican Senate passed a significant combination of tax increases and benefit constraints. Today, Americans of all ages are looking for another bipartisan solution to solve Social Security's funding challenges. 

The question is, will the country's leaders in Washington today join together to do it again?

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.