More than one survey has found that young people are more optimistic than older people. The Sine Institute’s Reimagining the American Dream: Views From Young Americans survey, for example, found that “Young Americans remain optimistic that their lives will be better than their parents in many areas and that they have a good chance of achieving what they consider to be the American Dream.”
That optimism shrinks, however, when it comes to politics — and according to another survey, when it comes to Social Security.
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According to the Nationwide Retirement Institute 2023 Social Security Survey, when shown the statement “I will not get a dime of the Social Security benefits I have earned,” 24% of respondents agreed with it. About 7% agreed strongly, and 17% were somewhat in agreement. The pessimism increased with younger people, though:
Survey Responses
Gen Z
Millennials
Gen X
Baby Boomers
Approximate ages
11 to 26
27 to 42
43 to 58
59 to 77
Percent agreeing with statement
45%
39%
25%
10%
Data sources: Nationwide Retirement Institute and CNN.
Those are quite pessimistic numbers among the younger generations, especially considering there is ample reason to be optimistic. For one thing, remember that Social Security benefits are not a random gift from the government that can easily be cancelled. For all our working lives, we pay into the Social Security program via taxes on our income.
Specifically, most workers pay a 6.2% tax on their income with their employers contributing an additional 6.2% for a total of 12.4%. The news is worse for self-employed workeres as they must pay the entire 12.4% themselves. Social Security benefits are sometimes referred to as “entitlements” in a pejorative manner, as if they’re government handouts, but you really are entitled to benefits in retirement if you’ve been paying into the system sufficiently, as most of us have done.
It is true, though, that Social Security is facing some challenges. As Americans have been living longer in recent decades, Social Security’s coffers are slowly draining due to the additional years of benefits it’s obligated to pay out to beneficiaries.
You can see below how the all-important ratio of covered workers to beneficiaries has been shrinking:
Year
Ratio of Covered Workers to Beneficiaries
1945
41.9
1955
8.6
1975
3.2
1985
3.3
1995
3.3
2005
3.3
2015
2.8
2020
2.7
2021
2.7
Data source: Social Security Administration.
The program is still running a surplus, but the surplus is shrinking, and it’s expected to turn into a deficit within a decade. But that doesn’t mean that retirees “won’t get a dime.” Instead, the worst-case scenario has beneficiaries receiving a 23% reduction in their benefits, leaving them with 77% of what they’re due. That’s not great news, but it’s far from nothing.
Meanwhile, there are multiple ways that Social Security can be shored up or even strengthened, such as by increasing the tax for it and/or changing the cap that limits how much of your income is taxed for Social Security. (For 2023, only earnings up to $160,200 face taxation.) It’s all up to Congress, but many in Congress surely appreciate that if they let Social Security implode, they’ll upset their constituents.
So the news isn’t as bad as many young people have come to believe. Still, their pessimism can serve them well. Even those expecting to collect their full benefits will likely need to save and invest for retirement, because Social Security alone is not likely to provide sufficient income. It’s best to start doing so as soon as you can — even in your 20s or 30s — and assuming that you’ll get zero from Social Security might help you do so in earnest.
Hoping for the best while preparing for the worst can be a great way to plan and prepare for retirement.
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