Due to the fact that it was created by an Congress, though it was 90 years ago, Social Security is often viewed through a partisan political lens, but the reality is something different. That’s part of the good news, but there are concerning points, too.
A recent study by the Cato Institute confirms 83% of Americans have favorable views of this government program and that positivity crosses party lines as 90% of Democrats, 82% of Republicans and 81% of independents see value in Social Security. Encouraging data points to be sure, but the survey is littered with concerning points which cannot be ignored.
For example, 30% of respondents to the Cato study said they believe Social Security won’t be around when they retire and 70% say benefits will have to be reduced at some point to ensure the program’s viability.
“A majority (58%) say Social Security offers younger workers a “worse deal” than current retirees receive, and nearly two-thirds (62%) believe Congress has broken its promises in managing the program. Notably, Democrats (60%) and Republicans (55%) agree that younger workers are getting a worse deal, and 58% of both groups believe Congress has broken its promises,” according to Cato.
Speaking of Young People…
Not surprisingly, there is a generational divide when it comes to Social Security. Most boomers are collecting it, so they’re in the clear, but the younger a worker is, the more worried they are about the program’s future and rightfully so. After all, they’re paying Social Security taxes and have every right to expect the government makes good on the promise made to them.
Here’s where things get interesting. Cato points out that Gen Zers are about as likely as current recipients to support tax hikes to support the current level of Social Security payments – the level young people are entitled to in the future. But – there’s always a “but” – Gen Z opposes tax increases to maintain current Social Security payments if it means their benefits will be diminished.
Adding to the baby boomer/young people rival is this nugget in the Cato study: The only age group that supports raising taxes to support Social Security while directing less benefit to young workers is the 65+ cohort. To be fair, Gen Z isn’t “innocent” in all this.
“When asked to choose, Gen Z is the only cohort that prefers cutting benefits for current retirees to protect younger workers from higher taxes (53%). In contrast, majorities of 30–44 year olds (57%) and even more 45–54 year olds (74%), 55–64 year olds (84%), and those age 65 and over (89%) say current retiree benefits should be protected even if that means higher taxes on younger workers,” adds Cato.
Gen Z Needs Social Security Education
A potential point of emphasis for advisors working with younger clients is Social Security education. As in most of what they know about the program is learned in a high school history class and the rest is formed via inaccurate assumptions. For example, nearly half of young respondents to the Cato poll view Social Security as a retirement savings program, which it is not.
Additionally, Gen Z, broadly speaking isn’t aware of Social Security’s mechanics. Half of that age cohort thinks their Social Security taxes are saved explicitly for them or “invested” in the Social Security Trust Fund. As advisors know, that’s not the case.
“Less than a third (29%) understand their taxes pay for current retirees. Conversely, only 19% of seniors think their money is waiting for them in a personal account (3%) or ‘invested’ in the Social Security Trust Fund (16%). Gen Z is also much less likely than seniors are to know when Americans can first start collecting benefits (80% vs. 32% didn’t know the right answer),” concludes Cato.