Skeptical of the system, savers admit to having little confidence in the likelihood of the Social Security Administration paying out benefits.
Research published today by T. Rowe Price finds that just 38% of respondents are sure in the SSA’s ability to pay out scheduled benefits. Younger investors are even more doubtful, the firm’s annual Retirement Savings and Spending study reports, with both Gen Z and Millennial respondents expecting to receive just half of scheduled benefits.
T. Rowe Price says the distrust could be superficial, adding that it may come from an ignorance surrorunding the program. “The level of pessimism among younger workers is probably unwarranted and is likely due to a lack of understanding about how the program works,” wrote Sudipto Banerjee, global retirement strategist at T. Rowe Price.
Still, even older workers reported concerns on whether they would receive benefits, with a little over half (59%) of Baby Boomers expressing confidence they would. Further, only 25% of Gen Xers say they expect to receive full Social Security benefits.
Currently, the Social Security Administration has nearly 10 years before it sees a depletion in its trust fund, meaning that 70 million retirees will see cuts of up to 21% on their benefits if Congress does not take action to remedy the system.
Despite their cynicism, T. Rowe Price reports that its solutions to Social Security’s long-term funding challenges received little to no support from respondents. According to the findings, the choice of Congress to stall on any action and allow the trust fund to deplete was the least popular solution, with 60% of workers responding poorly to the option.
Only one-third of respondents approved of the solution to raise or eliminate the income cap on payroll taxes.
Another proposed solution, eliminating the 401(k) tax deductions to address the Social Security funding gap, proved to be deeply unpopular, with 55% of respondents expressing disapproval and only 15% expressing approval, T. Rowe Price reported.
Ultimately, T. Rowe Price states that any solution proposed by Congress would be favored over doing nothing. “…Any steps Congress takes to address the long-term outlook of Social Security are likely to be preferred over inaction,” added Banerjee.
Additional insights from T. Rowe Price’s research can be found here.
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