The fear that Social Security will one day be obsolete has existed for decades, but that notion has become increasingly possible in recent years. The Social Security Administration expects the program to remain unchanged until 2035, after which only about 75% of scheduled benefits will be covered.
Though the federal government has maintained that Social Security Insurance will exist in some form in the long term, most Americans are worried it will collapse before they can cash in.
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Atticus, a law firm specializing in helping clients receive government insurance and benefits, recently released a new report detailing public concern over the fate of Social Security payments.
The study found that many Americans are proactively adjusting their finances in anticipation of reduced payments.
Workers are changing their retirement strategy to prepare for the loss of Social Security
Despite reassurance from the federal government, 83% of Americans believe Social Security funds will be diminished in the next decade, and 63% think payments will be gone entirely by 2035.
Since retirees collectively receive over $100 million in benefits each month, it makes sense that three in four Americans (73%) believe that the depletion of Social Security would directly impact their financial planning and retirement strategy.
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- How average Americans can better plan for 401(k), retirement income
Increasing savings, reducing spending, and increasing 401(k) and IRA contributions are the most popular ways workers are preparing themselves for the possibility of a defunct Social Security program. However, this approach varies by generation:
- Baby Boomers are the most likely to reduce spending and get a part-time job during retirement.
- Gen X are the most likely to adjust their retirement age.
- Millennials are the most likely to increase retirement and savings contributions,
- Gen Z are the most likely to increase savings contributions and seek financial advice.
Adi Sachdeva shares insights on behalf of Atticus. "The most striking finding from the data is how different demographics plan for when Social Security may run out,” she said.
“Millennials and Gen X are the most proactive in their retirement approach, with the majority of both increasing contributions to savings and retirement accounts,” she continued. “Meanwhile, Baby Boomers, who are nearing or already in retirement, concentrate on cutting spending and/or working part-time during retirement.”
“This shows a clear generational divide in how Americans are rethinking their financial game plans: younger generations have a more aggressive approach to their long-term savings, while older generations are opting to make immediate changes to their current financial habits."
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Americans want the federal government to prioritize the preservation of Social Security Insurance
Half of seniors rely on Social Security as one of their primary income streams in retirement, highlighting how the failure of Social Security could mean financial ruin for most retirees. With a devastating outcome looming, many Americans are pushing for the government to take action.
87% of Americans want the government to safeguard Social Security, regardless of any impacts on the national deficit. However, increasing taxes on high earners (40%), increasing the full retirement age (35%), and implementing new taxes (28%) are the most popular measures among workers.
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Though typically unpopular, creating new taxes or raising current taxes may be the most effective way to compensate for the shortfall caused by Baby Boomers retiring and a smaller labor force to pay into the system.
The Center for Retirement Research at Boston College found that if payroll taxes were raised 3.6% from the current 12.4% social security contribution, the U.S. federal government could pay Social Security benefits through 2097 — and even generate a one-year reserve.
Given its broad implications, the future of Social Security has become a political talking point that affects voters of all ages and both parties.
Almost two-thirds (61%) of Americans aren’t confident that the government will take action to preserve Social Security, and 64% note that the candidate’s stance on the program will impact their vote in the 2024 Election.
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