The closer you get to retirement, the more interested you're likely to be in Social Security. But even people who have a long way to go before they retire usually are at least somewhat familiar with the program.
However, there's a lot about Social Security that many people don't know. For example, a 2021 poll sponsored by Nationwide found that 39% of respondents weren't sure when they'd be eligible for benefits.
More concerning, though, is what some think about Social Security that simply isn't true. Here's the one Social Security myth that nearly half of Americans believe.
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The myth
Last month, The Associated Press-NORC Center for Public Affairs Research conducted a poll to find out what Americans thought about Social Security and Medicare. This poll revealed that 48% of Americans were not confident that either program would provide benefits when they reached the age to be eligible. Another 33% were only somewhat confident.
Younger Americans were even more skeptical. Of individuals surveyed who were under the age of 45, 60% weren't confident about receiving benefits. Only 10% were very or extremely confident that Social Security and Medicare would pay benefits when the time comes.
This isn't a new development. The University of Southern California's Understanding America Study conducted in 2014 found that 41% of Americans who had not retired yet were "not at all confident" that Social Security benefits would be available when they retired.
Politicians sometimes use language suggesting that Social Security is going bankrupt. This can contribute to the belief that the program won't be able to provide any benefits in the future. But this view is mistaken.
The reality
There's a reason why so many are worried about Social Security benefits not being there when they retire. The program's trust funds will be depleted in the not-too-distant future. In the latest report published last month, the Social Security Trustees estimated that the program would become insolvent in 2034 -- one year earlier than previously predicted.
However, Social Security will still be able to fund the majority of benefits owed even when its trust funds run out of money. The program will continue to generate significant revenue from ongoing payroll taxes.
According to the Social Security Trustees 2023 report, these payroll taxes will be able to fund roughly 77% of scheduled benefits after the Old-Age and Survivors Insurance (OASI) Trust Fund is depleted in 2033. But it's likely that lawmakers would tap another trust fund currently targeted for disability insurance to keep full benefits flowing. With the two trust funds combined, Social Security would be able to pay 80% of scheduled benefits after 2034.
Multiple choices
Keep in mind that this future reduction in benefits will only happen if nothing is done to prevent cuts from taking effect. But a political firestorm would almost certainly erupt if the president and the U.S. Congress don't take action between now and 2034 to preserve benefits. It seems highly likely that something will be done.
There are multiple ways to reform Social Security to keep benefits at current levels. One option is to raise the payroll tax cap, which is currently set at $160,200. The Social Security Administration (SSA) estimates that increasing this cap to $400,000 would reduce the projected Social Security shortfall by 64%.
Another idea that has received significant attention is gradually increasing the full retirement age from 67 for future retirees. SSA thinks that increasing the retirement age by two months per year until it reaches 68 would reduce the projected shortfall by 15%. Pushing the full retirement age out further would have an even greater positive financial impact.
The bottom line is that it's a myth that Social Security won't be able to provide benefits for Americans. However, exactly what changes could be on the way to prevent any benefit cuts remains a mystery.
