Rosalind Evans
With most American workers contributing to Social Security throughout their careers, many expect to rely on these benefits upon retirement. However, a recent survey by the Nationwide Retirement Institute reveals that a staggering 72% of adults worry that Social Security will run out during their lifetimes.
A Worrying Trend Among Millennials and Gen Xers
According to Nationwide’s survey of over 1,800 adults, Millennials and Gen Xers are the most anxious about the potential depletion of Social Security funds. The concern is not unfounded, given that 23% of respondents believe they won’t receive any Social Security benefits despite their contributions.
“The odds of it going away completely, I think, are low,” said David Blanchett, managing director and head of retirement research at PGIM DC Solutions. However, the possibility of reduced benefits remains a valid concern, especially for higher earners.
The Reality of Social Security’s Future
The Social Security trust fund is projected to run out by 2033, resulting in only 79% of benefits being payable. This potential reduction has heightened anxiety, making Social Security a significant issue in the upcoming presidential election. Despite these concerns, experts like Joe Elsasser, a certified financial planner and president of Covisum, emphasize that a complete elimination of benefits is unlikely.
“It’s reasonable to expect a benefit cut for younger people,” Elsasser noted. “But to plan for it not to be there at all is a poor assumption.”
Misunderstandings About Social Security Benefits
The Nationwide survey also uncovered that many Americans lack a comprehensive understanding of Social Security. “What is disappointing is to recognize that the gaps widened,” said Tina Ambrozy, senior vice president of strategic customer solutions at Nationwide.
A significant portion of Americans—51%—are unaware of how to maximize their Social Security benefits. Furthermore, 33% are uncertain when they qualify for full retirement benefits. This lack of knowledge extends to the specifics of benefit calculations, which are based on the highest 35 years of earnings.
Maximizing Social Security Benefits
Claiming Social Security benefits can begin as early as age 62, though this permanently reduces benefits. Waiting until the full retirement age—between 66 and 67, depending on birth year—ensures 100% of earned benefits. The benefits increase further for those who can wait until age 70.
“If you wait until age 70, you get the maximum possible benefit,” Blanchett explained. “Every month or year you claim before that, the benefit is proportionally reduced.”
Given the complexities, consulting a financial professional is recommended to effectively navigate Social Security claiming options.
The Importance of Social Security in Retirement
As Americans face potential shortfalls in retirement savings, Social Security is crucial in preventing a widespread retirement crisis. “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 pointed out.
The concerns surrounding the future of Social Security are significant, particularly among younger generations. While the potential for reduced benefits exists, the complete elimination of Social Security is highly unlikely. Educating the public on maximizing their benefits and consulting with financial professionals can help alleviate some of these concerns.
