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5 Things Social Security Surveys Teach Us

By Sean Williams – Apr 8, 2018 at 6:06AM

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You can learn a lot by listening to the public.

For tens of millions of Americans, Social Security isn't just some check they'll receive during retirement. It's a financial lifeline responsible for keeping over 22 million people – including retirees, the disabled, and survivors of deceased workers – out of poverty, according to the Center on Budget and Policy Priorities.

Yet, polling the American public, both working and retired, about Social Security exposes something surprising. Namely, that there's a lot about Social Security the public doesn't understand. And as the saying goes, what you don't know can hurt you.

A Social Security card wedged in between cash bills.

Image source: Getty Images.

In 2015, MassMutual Financial Group offered an online, 10-question, true-false Social Security quiz that 1,513 people took. Only 28% were able to pass, with seven out of 10 correct answers, and just a single person answered all 10 questions correctly. 

Still, Social Security surveys can teach us a lot about the current state of the program, and what Americans would like to see happen. In no particular order, here are five things you can learn from these surveys.

1. Seniors are way too reliant on Social Security

While it probably comes as no shock to many, current retirees are expecting way too much from Social Security. A Gallup survey in April 2017 found that 55% of retirees count on Social Security to be a "major" source of income, with another 34% leaning on it as a "minor" income source. Essentially, just one in 10 seniors could get by without their guaranteed monthly payout. By comparison, the Social Security Administration suggests that retirement benefits are designed to replace 40% of the average workers' wages. 

The results of this poll are worrisome given that the 2017 report from the Social Security Board of Trustees forecast the depletion of the trust's $3 trillion in asset reserves by 2034. In order to resolve the program's estimated $12.5 trillion cash shortfall, an across-the-board cut in benefits of up to 23% may be needed to retain solvency through 2091.

Social Security cards and cash bills atop a benefit card.

Image source: Getty Images.

2. Future retirees are expected to lean too heavily on the program as well

Current retirees aren't the only ones who are relying too much on Social Security. A separate Gallup poll in April 2017 showed that 79% of those surveyed expected to be reliant in some form on their Social Security income. In particular, 34% expected it to be a "major" source, and 45% a "minor" source. While this is indeed lower than the poll Gallup conducted on reliance by current retirees, it's worth noting that the 34% of nonretirees expecting it to be a "major" source is the second-highest reading since Gallup began this poll in April 2001.

What does this mean? In short, some working Americans still expect Social Security to be a financial savior when, in reality, it's designed to be a supplemental source of income relative to a pension, asset income, or other source of annual earnings. If the trustees' report proves accurate, today's working Americans who aren't saving much could be in for a disappointing surprise.

A young manufacturing worker standing in front of machinery with his arms crossed.

Image source: Getty Images.

3. Working Americans are (thankfully) wrong about Social Security's "bankruptcy"

Surveys of working Americans have regularly shown that around half don't expect Social Security to be around by the time they retire. A Gallup poll in the summer of 2015 found that 51% of nonretirees didn't expect a payment from the program upon retirement, compared to 45% who believed they'd still be paid. Thankfully, the fear of Social Security going bankrupt is nothing more than a pervasive myth.

This isn't to say that Social Security doesn't have issues. A confluence of factors is indeed expected to deplete its asset reserves within 16 years. However, the bulk of the program's funding derives from its 12.4% payroll tax on earned income up to $128,400, as of 2018. As long as Americans keep working, and Congress leaves the payroll tax as the primary means of generating income for the program, Social Security can't go bankrupt. There will always be money flowing in to disburse to beneficiaries. This doesn't mean the current payout schedule is sustainable -- thus the possible need for benefit cuts of up to 23% -- but it does rule out insolvency.

Social Security cards lying atop a W-2, highlighting payroll taxes paid.

Image source: Getty Images.

4. Americans prefer raising taxes over benefit cuts

Even though nonretirees have done a presumably poor job of reducing their reliance on Social Security, they still have a very clear preference when it comes to fixing the aforementioned $12.5 trillion cash shortfall. In a poll during the summer of 2015, Gallup asked respondents whether they'd favor raising taxes or cutting benefits as a means to fix Social Security. Some 51% chose "raise taxes" compared to 37% who replied "curb benefits."

Historically, raising taxes, especially on wealthier Americans who can escape Social Security's payroll tax on earned income above $128,400, is the most popular fix with the public. The reason being that over 90% of working Americans are already paying into Social Security with every cent they earn. Therefore, raising or eliminating the cap on maximum taxable earnings would require the rich to pay more, while impacting only a small percentage of working Americans.

A Social Security card lying next to IRS tax form 1040.

Image source: Getty Images.

5. Seniors hate the taxation of retirement benefits. Like really, really hate it.

Last, but not least, perhaps no Social Security survey produced more overwhelming results than a poll conducted by The Seniors Center, a nonprofit organization in Washington, in March 2017. When questioning seniors about their views on the taxation of benefits, 91% expressed that they didn't believe the taxation of benefits should continue. In other words, stopping the taxation of Social Security benefits, which becomes applicable at $25,000 in adjusted gross income (AGI) for single taxpayers and $32,000 in AGI for married couples filing jointly, would provide an immediate boost in income for a majority of retirees. 

Unfortunately, this highly unpopular tax isn't going away anytime soon. In 2016, the taxation of benefits generated $32.8 billion, and future revenue generated from this tax will become even more important given the program's impending cash shortfall.

Even though average Americans still have a lot to learn about Social Security, they can still teach us a lot about the current state of the program, and where it might be headed.

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