Half of Workers Expect to Rely on Social Security Benefits in Retirement: Bankrate

A Social Security card sits alongside checks from the U.S. Treasury in Washington on Oct. 14, 2021. Kevin Dietsch/Getty Images

A new Bankrate survey finds that many of today’s workers expect to rely on Social Security benefits, but most are concerned that they will not receive monthly checks upon retirement.

According to the study, 53 percent of Americans who have not retired anticipate depending on these retirement benefits to pay for their living expenses once they leave the workforce.

Despite expectations of relying on these promised benefits, “the financial outlook for this popular program is cloudy,” says Mark Hamrick, senior economic analyst at Bankrate.

Nearly three-quarters (73 percent) of U.S. workers worry that the federal government will not mail monthly checks once they reach their winter years.

Consternation surrounding the program’s solvency comes as the Congressional Budget Office projected in August that Social Security benefit payments will be reduced by 23 percent when the Old-Age and Survivors Insurance and Disability Insurance trust funds are exhausted in fiscal year 2034.

“There’s a vast divide between Americans’ concern about the looming Social Security funding shortfall and the lack of serious and thorough conversation among elected officials about what to do about it,” Hamrick said in the report. “The result is that the American public’s financial well-being is not being tended to.”

During his election campaign, President-elect Donald Trump vowed to eliminate taxes on Social Security benefits and pledged to “fight for and protect Social Security.”

Economists say the incoming administration’s proposal could exacerbate the scheme’s deteriorating finances.

The Committee for a Responsible Federal Budget, an independent policy organization, projected this would weaken the retirement program’s finances and make it insolvent three years earlier than expected.

Trump has dismissed these concerns, pledging to close Social Security’s long-term deficit—the 75-year unfunded obligation is more than $23 trillion—by growing the economy and expanding drilling for crude oil and natural gas.

Shannon Benton, the executive director at The Senior Citizens League, has mixed feelings about the president-elect’s idea.

“We don’t believe that Social Security should be taxed,” Benton said in an interview with The Epoch Times. “However, because the Social Security taxes do go right back into the Social Security Trust Fund, it’s a source of income for an already failing program.”

It is a balancing act between protecting Social Security and helping seniors, she says.

Studies have found that many American seniors are financially struggling in their retirement.

A September report by financial education website Bad Credit found that a quarter of retirees have had to return to work due to a lack of resources. A third of retirees say they do not feel financially stable and another third reported struggling to make ends meet after they retired.

Ultimately, Benton thinks policymakers in Washington should abolish taxes on retirement benefits and “then get busy on Social Security reform.”

Reforming the Social Security System

Surveys show that Americans are becoming concerned about the state of the Social Security system.

A Social Security Administration site in Garden Grove, Calif., on Feb. 19, 2021. John Fredricks/The Epoch Times

In June, a Gallup poll discovered that 80 percent of adults under 65 are “worried” or extremely worried” about benefits being unavailable upon retirement age.

A July Nationwide Retirement Institute survey found that 23 percent of respondents think they will not receive benefits when they retire.

Neither of the presidential contenders proposed changing Social Security. President Joe Biden, according to a White House budget fact sheet this past spring, opposes “any proposal to cut benefits.”

Over the years, lawmakers have discussed various mechanisms to bolster the Social Security Administration’s finances. These have included raising the eligibility age, conducting means testing, and increasing the payroll tax cap.

According to Benton, her organization’s supporters favor forming a bipartisan commission comprised of officials “in the thick of it in government.”

“It’s always easy to see the problems but not so much the fixes,” she said.

Her group advocates for two ideas: switching the Consumer Price Index (CPI) used for adjusting benefits and providing a lump-sum makeup benefit for lost purchasing power.

The Social Security Administration’s current cost-of-living adjustment (COLA) formula depends on the CPI-W. This index tracks price changes in goods and services for urban wage earners and clerical workers, including food, transportation, and housing.

Benton recommends that the COLA rely instead on CPI-E, which measures expenses more likely to be reflected by seniors’ spending habits, like health care expenditures and prescription drugs.

In October, the Congressional Research Service studied the effects of tying COLA to CPI-E. The report concluded that this alternative would result in higher inflation adjustments and greater monthly benefits.

Current-law COLA—2.5 percent—will lead to an estimated monthly Social Security benefit of $1,976 in January 2025. Calculations with a hypothetical 3 percent COLA based on CPI-E would add an extra $9 to the average retired worker benefit.

Likewise, the SSA estimates that using CPI-E would bolster the annual COLA by about 0.2 percentage points.

A July study by The Senior Citizens League found that Social Security benefits have lost 20 percent of buying power since 2010. As a result, the group concluded, retirees would need to receive a lump-sum payment of more than $4,400 “to build their lost value.”

One economist thinks taking a sledgehammer to the current system would be prudent.

Boston University economist Laurence Kotlikoff previously told The Epoch Times that the federal government could phase out Social Security while covering all accrued obligations to retirees and current workers. He also suggested eliminating Social Security’s earnings test, “which is trapping tens of millions of early retirees into poverty at a huge loss in federal tax revenues and national output.”

Kotlikoff suggested that the U.S. government could replace it with a progressive retirement account system comparable to Singapore.

The Singaporean government maintains a comprehensive retirement system called the Central Provident Fund (CPF). Employees and employers pay a portion of workers’ salaries into the system. The contributions are then divided into three accounts: Ordinary (housing, insurance, and education), Special (retirement), and Medisave (health care expenditures).

According to the Mercer CFA Institute Global Pension Index, Singapore’s CPF is ranked fifth globally. The Netherlands’ retirement income system retained first place, followed by Iceland and Denmark.

The United States was ranked 29th.