Whether you're well into retirement, preparing to retire, or still have decades to go before hanging up your work gloves for good, you're likely affected by Social Security.
Arguably the most important entitlement program, the Social Security Administration had more than 59.7 million beneficiaries on its payroll as of September, and is expected to pay out a record $944 billion in total benefits this year. Despite being a critical program designed to provide some degree of financial security to low-income retirees, questions, concerns, and misconceptions abound regarding Social Security.
Five shocking Social Security findings
Based on the latest national survey conducted by Gallup -- a survey it has conducted for years -- five shocking findings, both encouraging and discouraging, emerge.
1. More people than ever expect Social Security to be a "major source" of income
Since 2001, a worrisome trend has surfaced, with more working respondents suggesting that Social Security will play a "major" role in their retirement income.
According to the latest statistics, 36% of still-working respondents believe Social Security benefits will be relied upon as a major source of their income, compared to 48% who believe it'll be relied on to a minor degree and 14% who don't believe it'll be a source of income they rely on at all in retirement. The 36% figure is the highest on record.
This answer is particularly scary because baby boomers as a whole are heading into retirement unprepared and with their retirement accounts underfunded. Adding fuel to the fire, substantial changes are needed to the Social Security program in terms of raising more tax revenue, cutting benefits, or enacting some combination of the two, otherwise the program will burn through its cash reserves by 2034. In other words, retirees who rely on Social Security as a major source of income in retirement could be in for an unwelcome surprise (e.g., a possible benefits cut) in less than two decades.
It's worth noting that current retirees' reliance on Social Security for income has remained relatively steady since 2002.
2. Satisfaction with Social Security and Medicare has improved, slightly
Here's one you probably didn't expect: The overall opinion on the Social Security and Medicare programs have improved ever so slightly.
In January 2001, just 6% of respondents were "very satisfied" with both systems, 32% were "somewhat satisfied," 32% were "somewhat dissatisfied," and 25% were "very dissatisfied." The most recent responses look like this: 11% very satisfied, 26% somewhat satisfied, 27% somewhat dissatisfied, and 29% very dissatisfied. Arguably, based on margin of error, these two surveys are quite similar. However, you can make a case that the number of respondents who are very satisfied with these programs demonstrated a significant increase since 2001. Or, at minimum, you could suggest that some respondents have moved away from a neutral opinion of both programs and now have stronger feelings one way or another.
3. More than half of Americans still believe this egregious myth
As always, the most disappointing finding of Gallup's survey is that the most pervasive myth of Social Security continues to live on, which is the belief that the program is headed toward bankruptcy.
In 2015's survey of non-retirees, just 45% of respondents believed that the Social Security system would be able to pay them benefits when they retire compared to 51%, who said that the program would not be able to pay them benefits. If there is a silver lining here, it's that only 36% of respondents said "yes" in 2010 with 60% saying "no," so the myth has at least partially subsided over the last five years.
To be crystal clear, the Social Security program isn't headed toward insolvency. Even if the trust's cash reserves run out by 2034, as the latest Social Security Trustees report implied, Congress will simply compensate by cutting benefits 21% to perpetuate the payment of benefits for another 50-plus years. This means, unequivocally, that you will receive Social Security benefits when you retire. However, it's still not in your best interests to depend too much on those payments. The SSA suggests that Social Security benefits are only designed to replace about 40% of working income during retirement.
4. Yet more consumers than in prior years believe the program is in better shape
Here's a head-scratcher if I've ever seen one: More than half of consumers don't believe Social Security benefits will be there for them when they retire, yet when asked to offer their opinion on the health of the Social Security program, respondents have a rosier view now than they did five years ago.
In 2010, a combined 77% of respondents suggested that the Social Security system was in "crisis" or had "major problems" compared to a combined 66% in the 2015 survey. In fact, the number of respondents who believed that the system has "no problems" shot up to 5%, tying an all-time high reading registered back in 1998.
On one hand, it's encouraging to see at least some optimism returning to the program responsible for supporting low-income retirees, survivors of deceased workers, and disabled persons. But I also have to question whether this jump in optimism is misplaced. As we just saw above, more than half of respondents are unaware that the Social Security system won't be going bankrupt, so I question how well respondents can grasp how healthy the program really is.
5. Consumers are OK with tax increases
Lastly, when respondents were given a choice between raising taxes or cutting benefits to secure the long-term future of the Social Security program, the overwhelming choice, once again, was to raise taxes.
The latest survey showed that slightly more than half (51%) of respondents favor boosting taxes to raise additional revenue compared to 37% of respondents who would prefer benefits be cut. This response is practically identical to the 53% who wanted to raise taxes, and 38% who called for a benefits cut, in 2005. Consumers' responses shouldn't come as that big of a surprise considering that more people than ever are relying on Social Security benefits to be a bigger part of their retirement income. A benefits cut could prove devastating for individuals who rely most on Social Security.
If Gallup's survey demonstrates anything, it's that Congress still has a lot of work to do before a long-term Social Security fix is in place, and that consumer education of the program still isn't where it needs to be. Look for Social Security to remain an extremely important issue as we head into election season.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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