Please ensure Javascript is enabled for purposes of website accessibility

56% of Americans Worry They Won't Get Social Security. Are They Right?

By Maurie Backman - May 21, 2020 at 5:07AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

More than half of Americans today think Social Security will eventually dry up. But are they spot on, or overly pessimistic?

Social Security helps millions of seniors stay afloat financially, and without those benefits, a large number of them would no doubt risk living in poverty. But the program is facing its share of financial challenges that are making many Americans very worried about the prospect of not collecting retirement benefits at all.

In fact, 56% of those surveyed in Simplywise's May Retirement Confidence Index stated that they're scared that Social Security will dry up before they retire, or during their retirement. And that's a terrifying notion to contemplate.

A man sits thoughtfully in front of a laptop at his desk.


Let's cut to the good news: Social Security is in no danger of going away completely. The program gets the bulk of its funding from payroll taxes, so as long as there's an active workforce, benefits can still be paid to some degree. What is likely to happen in the coming decade and a half, though, is that Social Security's trust funds run out of money. As of now, the program's Trustees anticipated that happening in 2035. Once that happens, benefit cuts are a distinct possibility, and that alone should indeed have current and future recipients worried.

However, that doesn't mean future retirees are completely out of luck. Those who start saving for retirement immediately can compensate for lower benefits -- and enjoy their senior years without financial worry.

Saving independently is crucial

While the idea of a reduction in Social Security is no doubt unsettling, the reality is that those benefits were never designed to sustain seniors by themselves. The average beneficiary today collects around $18,000 a year, which is hardly a lot of money to live on. In fact, it's said that Social Security will replace about 40% of the average earner's former wages, but most seniors need around twice that much replacement income to keep up with their expenses and maintain a decent standard of living. As such, saving for retirement independently has always been important. And in light of potential benefit cuts, it's even more crucial.

Fortunately, younger workers don't have to part with too much income to build a solid level of wealth. A 25-year-old who socks away $250 a month between now and age 67 will wind up with around $692,000 in retirement savings, assuming a 7% average annual return on investment during that 42-year window. That 7%, however, is a few percentage points below the stock market's average, so it's a reasonable benchmark to work with.

Of course, current retirees who rely heavily on Social Security stand to be hurt the most if benefits are indeed cut since they can't go back in time and build savings, so lawmakers are trying to figure out a way to avoid that scenario. But younger workers may be better off assuming that Social Security won't cut it in retirement. That way, they're apt to be motivated to build savings of their own -- savings that spell the difference between just scraping by once their careers come to a close or enjoying retirement to the fullest without the burden of constant financial stress.

The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.