In case you haven't heard, Social Security is in some pretty big trouble.
Last month, the Social Security Board of Trustees released its annual findings that examine every nook and cranny of the program in both the short (10 years) and long term (75 years). The end result, which has been the same since 1985, is that Social Security isn't expected to generate enough revenue between now and the next 75 years to sustain its existing payout schedule.
The gist is that a number of ongoing demographic changes, including increased longevity, boomer retirements, growing income inequality, and declining birth rates, to name a few, are expected to rapidly increase program outlays. By 2020, following an estimated 37 consecutive years of net-cash surpluses, Social Security is expected to expend more than it collects. This net-cash outflow should increase quickly with each passing year, leading to the projected depletion of the program's $2.9 trillion in asset reserves by 2035.
To be crystal clear, Social Security doesn't need a dime in its asset reserves to continue making benefit payments. Recurring sources of income that include its 12.4% payroll tax on earned income, as well as the taxation of benefits, will ensure that the program doesn't go bankrupt. But if the program isn't dealt with very soon by lawmakers, retired workers could be facing an estimated benefit cut of up to 23%, which in 2019 dollars could put the average retiree dangerously close to the federal poverty level.
Even if Social Security isn't going bankrupt, an up-to-23% benefit reduction by 2035 would be really bad news, with more than three out of five seniors reliant on Social Security for at least half their income.
Public worry concerning Social Security hits a surprising low
The above information makes what I'm about to tell you especially surprising. According to a March 2019 survey from national pollster Gallup, the American public's worry about the state of the Social Security system has hit an all-time low...of sorts.
With the exception of 2009, Gallup has polled the American public in March every year between 2005 and 2019, asking them the following question:
"How much do you personally worry about the Social Security system?"
The possible answers for respondents to choose from are: 1) Great deal, 2) Fair amount, 3) Only a little, 4) Not at all, or they could simply have no opinion, which is the default fifth choice.
In the March 2019 survey, 41% of respondents claimed that they had a "great deal" of worry about Social Security, which is the lowest on record, with 26% having a "fair amount" of concern. This combined 67% of people who clearly are concerned about the most important social program is the lowest reading in 14 years, and notably lower than the combined 79% who had a great deal or fair amount of worry about Social Security in March 2010.
Why is the American public less worried about Social Security?
Why the decline in pessimism? Although Gallup doesn't go into detail about the survey, I'll offer two guesses.
One possible reason could be the combination of higher personal saving rates and stock market strength (at least early in 2019). Even though U.S. personal saving rates are well below those of most developed European countries, U.S saving rates have more or less steadied between 6% and 8% over the past nine years. Prior to the Great Recession, saving rates were under 5% for the better part of three years. With the public saving more, and millennials not wanting to replicate the financial woes of their boomer parents, there might be less perceived future reliance on Social Security by at least some of these respondents, and thus less concern about what happens to the program. As an added note, the Social Security Administration suggests that the program is designed to replace about 40% of the average workers' wages during retirement.
Additionally, last year's trustees report had forecast that 2018 would become the first year that Social Security would suffer a net-cash outflow. However, the passage of the Tax Cuts and Jobs Act in December 2017, President Donald Trump's hallmark tax reform, appears to have spurred economic growth enough to stave off this inflection point until 2019 or 2020. This stronger economic growth, coupled with a small net-cash surplus when a small net-cash outflow was expected, may be lessening pessimism a bit.
Let's not twist the data too much
However, even though worries about the Social Security system may be at a "new low," based on Gallup's data, we can't ignore that two out of three Americans are still worried about Social Security's future a great deal or a fair amount, and that's not a small figure. Since personal saving rates are lower than what financial advisors recommend, many folks will wind up relying on their Social Security income, at least in some capacity, during retirement. That makes the current forecast of an up-to-23% benefit reduction for retired workers pretty worrisome.
Adding to the drama is the fact that lawmakers are fully aware that Social Security is in trouble, yet they seem to be incapable of doing anything about it. Despite Democrats and Republicans each having a core proposal that would put Social Security on more solid footing over the long run, neither solution can pass the Senate without at least some form of bipartisan support. That's a problem when both Democrats and Republicans are unwilling to cede an inch on their respective proposals, thereby dooming any measure designed to strengthen the program.
Unless you're one of the small percentage of the population who won't be reliant on Social Security to any extent during retirement, it's perfectly OK to be concerned about its future, as well as to encourage your elected officials to do something about it.