The vast majority of workers place their trust in Social Security. Should you do so?


Workers are surprisingly confident that when they retire, Social Security will be there for them.

According to the Employee Benefit Research Institute and Greenwald Research’s Retirement Confidence Survey 2022, which was released this week, 52 percent of workers are either “somewhat” or “very” confident that the Social Security system “will continue to provide benefits of at least equal value to the benefits received by retirees today?” This is only one percentage point lower than last year’s reading, which was the highest in the survey’s 30-year history.


Social Security Benefits


In 1994, the comparable percentage was 22 percent, and it was 28 percent in 2014.

The drumbeat of scary stories about the financial viability of the Social Security Trust Fund in recent years has made it surprising that workers’ confidence in Social Security has been trending upward. For example, the Social Security Board of Trustees projected in April 2020 that the Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds would be depleted in 2035, at which point only 79% of benefits would be payable.

It was purely coincidental that this report was released just a month after the COVID-19 pandemic induced the US economy into the functional equivalent of a medically induced coma. The Social Security Board of Trustees is required by law to publish an annual report on the financial condition of its trust funds. And the assessment contained in their 2020 report was largely unchanged from the 2019 report, albeit more optimistic in some ways.

However, nuance is not universally regarded as a virtue in the financial media. Readers are drawn in by Chicken-Little-style pronouncements about the sky about to fall. And, because the pandemic had predisposed many people to believe that the world was about to end, alarmist Social Security headlines drew a lot of attention. I don’t recall receiving any emails from readers when the 2019 Social Security Trustees report was released, but I was inundated with them after the 2020 report was released.

Studies have also shown that alarmist Social Security headlines influence retiree decisions. Last fall, for example, I reported on research on retirees’ decisions about when to begin claiming Social Security benefits. The researchers discovered that more alarmist headlines resulted in an earlier decision to file a claim, on average.

So it’s a pleasant surprise that the last few years of alarmist headlines didn’t persuade more workers to forego Social Security.


But, should we have faith in Social Security?

Of course, the more important question is not whether workers have faith in Social Security, but whether they should. As I have previously stated, I believe that confidence is justified—for a couple of reasons.

To begin, the projected Social Security Trust Fund depletion date in the 2030s must be placed in historical context. The timing of this depletion date, on the other hand, is hardly news. After the last time Congress changed Social Security’s finances, actuaries predicted that the trust fund would be able to meet all obligations until the mid-2030s. So we’ve known for four decades that repairs would be required before then. There is no longer a “crisis” in Social Security funding, as there has been since the mid-1980s.

Second, consider how long our politicians procrastinated the last time the Social Security system was on the verge of failing. That earlier depletion date was in July 1983, and Social Security’s actuaries had known about it for many years. Despite this, the Social Security Amendments of 1983, which strengthened the system’s financial viability, were not passed by Congress and signed into law by then-President Reagan until April 20 of that year. In other words, the system was not fixed until there were less than three months left in the year.

It’s safe to assume that politicians will wait just as long (or even longer, if possible) this time. Given the extreme partisanship, getting anything passed these days is difficult. Nonetheless, consultants from both parties say it’s nearly impossible for our elected officials to let the Social Security Trust Fund run out of money.

Even if they did, recipients would continue to receive the majority of their Social Security benefits. According to the most recent projections from Social Security actuaries, even if the trust fund is unable to pay 100 percent of the benefits to which recipients are otherwise entitled, it will still be able to pay 76 percent of those benefits. That’s not ideal, but it’s a lot better than nothing.

Furthermore, Martha Shedden, co-founder and president of the National Association of Registered Social Security Analysts, told me in an interview that even if only three-quarters of scheduled benefits are paid, Social Security will continue to be the primary source of income for many, if not the majority, of retirees. So, even if you believed that our politicians would allow the Social Security trust fund to run out of money, it’s unclear how your retirement planning would change.


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What’s the bottom line? We face greater and more pressing retirement financing challenges than what may occur with Social Security’s finances in the 2030s. At least according to the results of the most recent Retirement Confidence Survey, workers’ confidence appears to be justified.

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