Negative headlines about Social Security’s future may be affecting how prepared people feel when it comes to their own retirement.
Almost three-quarters or 74% of people say they cannot count on Social Security benefits when it comes to the money they will have in retirement, according to a new survey from Allianz Life Insurance Company.
The firm included questions on Social Security for the first time in its quarterly market perceptions study, in response to increased focus on the program in the news. The survey, which was conducted in March, included more than 1,000 respondents.
In late March, the Social Security Administration trustees issued a new annual report with a more imminent prognosis for the program’s two trust funds, one of which pays retirement benefits and the other disability benefits. In 2034 — one year earlier than previously projected — the program may be able to pay just 80% of the combined funds’ benefits.
The date of insolvency for the retirement benefits fund is approaching, and it is only a decade away, in 2033. At that point, only 77% of the benefits will be payable. Many leaders and experts agree that action needs to be taken, but there is still uncertainty about what changes will be made. This uncertainty is causing many people to worry about being able to rely on Social Security for their retirement. In a survey conducted by Allianz, 84% of Gen X, 80% of millennials, and 63% of baby boomers expressed concerns about relying on Social Security in retirement.
The survey also found that 88% of respondents believe it is critical to have another source of guaranteed income in retirement aside from Social Security to live comfortably. However, not everyone has access to such resources, and for many people, Social Security is their largest source of retirement income. In fact, for 14% of people, Social Security is their only source of income.
Despite this, some people make the mistake of claiming their benefits too early, thinking they need to get their benefits before the system goes broke. In reality, this does not help at all. Experts recommend using online tools or calculators to see how a potential 23% benefit cut would affect one’s retirement income.
To address the issue, lawmakers may follow the same strategy as in 1983, when changes were made to shore up Social Security. One key reform was raising the full retirement age, which is still being phased in today. For people born in 1960 or later, the retirement age is 67, not 66, as it was for older people.
Some leaders in Washington are already discussing raising the full retirement age to 70, which would result in claimants receiving a bigger boost of up to 8% per year for waiting to start benefits beyond the full retirement age up to age 70. Waiting until full retirement age still makes sense for people who are single and do not have a spouse or children who may qualify for benefits based on their record.
