OMG, does the complaining never stop. Next, I suppose you'll be crying that you can't afford a home.
Young Workers Fear They Will Never See a Cent From Social Security
Justifiably or not, a new generation frets over a possible meltdown in the long-running retirement program
By Joe Pinsker, WSJ
July 13, 2024 9:00 pm ET
U.S. workers paid more than $1 trillion into Social Security last year. Younger ones doubt they will get a dime when they retire.
The idea of Social Security disappearing is one of the country’s longer-running neuroses and shows few signs of abating. Some 47% of U.S. nonretirees believe Social Security won’t be able to pay them benefits when they retire, according to a 2023 Gallup survey, a level that has been mostly steady over more than three decades of polling.
Confidence today is lowest among those who are mid-career, ages 30 to 49.
Policy analysts say Social Security isn’t going away. Workers say their frustrations aren’t just about having little faith that the government will address a possible funding shortfall. They are also annoyed because they see older people enjoying benefits they don’t expect to receive.
Some of these younger workers are increasing their savings rates or subtracting Social Security from their retirement planning completely. Others say they are bitter, frustrated and uneasy about their long-term future.
Each month, hundreds of dollars are taken out of Chris Logue’s paychecks to help fund Social Security. He doesn’t expect to see any benefits himself. PHOTO: CHRIS LOGUE
Each month, a few hundred dollars is taken out of Chris Logue’s paychecks to help fund the federal program. He doesn’t expect to see any benefits himself.
“It’s like paying a very expensive toll on a bridge that’s collapsing before I can cross,” said Logue, a 36-year-old property manager in Oroville, Calif.
Logue thinks his parents and grandparents had it easier financially and sometimes jokes he won’t be able to retire until he is 95. He has heard the phrase “Social Security” in conjunction with “insolvent” too many times to feel otherwise.
“It’s been etched into our brains like a bad advertising jingle,” he said.
The government has warned for decades that Social Security’s trust funds, if combined, are on track to be depleted as the U.S. population ages. This has often mistakenly been taken to mean the program will go bust—a fundamental misunderstanding that fueled fears of a full-on collapse in Social Security, said Jason Fichtner, chief economist at the Bipartisan Policy Center, a think tank.
In fact, the trust funds cover only a portion of benefit payouts. The bulk of the rest is funded by payroll taxes.
The likelihood that current workers will get nothing from Social Security is practically nil, said Andrew Biggs, a former Social Security Administration official now at the American Enterprise Institute, a conservative think tank.
“That’s zombie apocalypse kind of stuff,” he said.
Worst-case scenario
Amanda and Andrew Meindl of Wauwatosa, Wis., said a financial adviser was baffled by their desire to plan for a retirement with no Social Security. They were told that the financial-modeling software wouldn’t allow for it.
The adviser “thought I was a nutjob,” said Andrew, 35, a federal government employee.
The couple gave up on professional projections and invested on their own, putting money into mutual funds, gold and cryptocurrency.
Andrew and Amanda Meindl gave up on professional projections and decided to invest on their own.
“We’ll plan like we’re going to get nothing, hope we get something and then maybe we’ll have enough,” said Amanda, a 36-year-old doctor.
Last year, Social Security paid out $1.38 trillion in overall benefits and got most of its funding from payroll taxes that generated $1.23 trillion. Believing that Social Security will vanish is akin to believing that these taxes will vanish too, policy analysts say.
Still, if Congress doesn’t shore up the program’s finances, projections show that it could be able to pay out only 83% of scheduled benefits in 2035, when the combined contents of its two trust funds would be depleted.
The worst-case scenario for a worker currently in their 20s or 30s likely would be receiving about 25% less in benefits than planned, according to Fichtner, the Bipartisan Policy Center economist.
Getting 75% of planned benefits isn’t great, but it is also not zero.
Fichtner said some doubts about the program’s future stem from the language that political commentators and people on social media use to discuss it.
“The trust funds could go insolvent, but Social Security itself does not go insolvent or go bankrupt,” he said.
The politics
For young workers worried about their ability to fund a comfortable retirement, Social Security is a natural focus for anxiety because of the stability it has long represented.
Doubts about the program were sown before the first monthly benefit checks went out in 1940, said Edward Berkowitz, a professor emeritus of history at George Washington University.
In a 1936 speech, Republican presidential candidate Alf Landon called the Social Security Act “stupidly drafted” and “a cruel hoax.” He lost the election that year in a landslide to Franklin D. Roosevelt, the Democratic incumbent and a force behind the program.
The last major change to Social Security benefits was in 1983. Congress changed the age for collecting full benefits from 65 to 67, which was phased in over decades. That reduced benefits by roughly 13% on average.
Today, Social Security is so popular that talk of altering it is fraught with political risk. Both President Biden and former President Donald Trump say they oppose cutting benefits. Biden has said taxes on higher-income people should rise instead, while some House Republicans have proposed raising the age at which Americans can collect full benefits.
Planning on nothing
There are older Americans who, fearing a cutback in benefits, start collecting Social Security before they reach full retirement age.
Francisco Ayala, a financial planner in Phoenix, runs projections for his younger clients assuming that they will get lower Social Security benefits than today’s retirees. But he doesn’t have a specific recommendation for how much extra they should save if they worry about cuts to Social Security because there are too many other variables in their long financial futures.
Raising payroll taxes by about 3.5 percentage points would close the shortfall in the Social Security trust funds, according to government projections. So Biggs, of the American Enterprise Institute, said early-career workers could increase their savings by the same amount to hedge the risk of reduced benefits.
Erik Huber, a 38-year-old in Cortland, N.Y., who works at a biotech company, sets aside much more than that.
He and his wife save about one-third more than they would if they were counting on full Social Security benefits. They both put 20% of their pay into 401(k)s and aim to invest an additional 5% of posttax income in a brokerage account.
“We’re making an extra effort to save, thinking, ‘let’s just assume this is all on us,’ ” he said.
Write to Joe Pinsker at joe.pinsker@wsj.com
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