Will Social Security be there for today’s young workers?

October 21, 2010

Social Security reform is a touchy subject these days for Thomas Brown and his grandparents.

“If I broach it with them, they are against any sort of legislation that would do anything to change Social Security,” says Brown (pictured below), a 28-year-old financial adviser with Pivot Point Advisors in Houston. “They depend on it, but when I look at my retirement plans, I don’t factor it in. The new way of thinking is that Social Security won’t be there — you have to plan for your own retirement.”

I write frequently about the future of Social Security, and pessimistic views like Brown’s always show up in the comments below my stories. Indeed, Gallup reports that six out of ten pre-retirement Americans don’t think Social Security will be able to pay them a benefit when they retire; those age 18-34 are even more pessimistic, with 76 percent saying they’ll get nothing from the system.

Thomas-BrownThe doubts aren’t difficult to understand. “If you listen to any number of the news outlets, they’ll tell you the system is going broke,” says Brown. “Every year I get a mailing from Social Security detailing what I can expect in benefits, and they say themselves that it will be bankrupt around 2040 and that they are going to be paying out more than we’re paying in. So it’s not fear, it’s math.”

But Social Security isn’t going bankrupt — far from it. The system was intended — and has always been — a pay-as-you-go system, with taxes collected from workers used to pay current retirees. But Social Security also is sitting on a $2.5 trillion Social Security Trust Fund (SSTF) that has been stockpiled to fund the looming wave of baby boomer retirements; that fund is projected to be sufficient to pay benefits until about 2037.

Pessimism about Social Security among the young isn’t new. “It’s a very longstanding trend,” says Virginia Reno, vice president for income security at the National Academy of Social Insurance. “It was true in a survey we did in 1979, and another in 1991. There are good reasons — older Americans have given more thought to retirement resources. They have looked into it more.”

Then there’s that threatening annual benefit statement we all receive from Social Security. (You’re reading that carefully every year when it arrives in the mail — right?)

As Brown says, the statement does draw attention to the fact that the system will start paying out more in benefits than we collect in taxes in 2016, and that the SSTF will be exhausted by 2037, absent any reforms to the system.

But even if no steps are taken to restore the SSTF’s long-term health, Social Security would still be taking in enough revenue in 2037 to pay about 76 cents of every dollar in promised benefits.

Support for Social Security - National Committee to Preserve Social Security & Medicare FoundationThat’s if nothing is done. But the politics of Social Security also suggest that reforms will be enacted to make sure future benefit commitments are met. Most public opinion surveys find remarkably strong support for keeping Social Security strong across all political parties and age groups. One poll, commissioned earlier this year by the National Committee to Preserve Social Security and Medicare Foundation, found that 69 percent of adults under age 35 agree that Social Security benefits shouldn’t be cut to reduce the federal deficit. The number was higher still among older age groups, but how many issues can you think of these days where 69 percent of Americans agree on anything?

“Social Security will be there, even after the exhaustion date,” says Ron Gebhardtsbauer, head of the actuarial science major at Penn State University and a former spokesman on retirement policy for the American Academy of Actuaries. “Members of Congress will make sure of that, or they will be out of a job.”

Congress may take up the Social Security issue after the November elections, when President Obama’s National Commission on Fiscal Responsibility and Reform reports its findings. Although we’re likely to hear dire warnings that boomer retirements will bankrupt Social Security, the truth is the SSTF has adequate reserves to finance the boomer retirement wave.

The challenge now is making smart — and fair — reforms that assure today’s young workers will receive their promised benefits when retirement rolls around.

Some reform advocates want to boost the full-benefit retirement age and adjust the annual cost-of-living adjustment (COLA) — changes that sound reasonable but would lead to very substantial cuts in lifetime benefits for millions.

A better solution would be to remove the cap on the maximum amount of earnings taxed for Social Security, currently set at $106,800. That change alone, depending upon its implementation, could entirely erase Social Security’s solvency problems.

Other ideas that have been floated include allowing the Social Security trustees to invest a small portion of its assets — say, 20 percent — in equities, or dedicating a new revenue source to the program, such as an estate tax.

But let’s not confuse pessimism and concerns about Social Security with support for keeping it going strong.

Photo: Thomas Brown in an undated handout. REUTERS/Handout


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Thank you for shining some much needed light on this subject. The media has really shirked its truth-finding responsibility when it comes to the crisis-mongering being done primarily by those who would really like to get rid of Social Security altogether.

Posted by Ninguna | Report as abusive

It’s a shame that Thomas Brown is lacking in a basic understanding of how Social Security works. People expect their financial advisor to understand all the elements of a retirement income plan. Telling clients that Social Security won’t be there for them (and telling them to file for early benefits because they believe it won’t be there for them) is tantamount to malpractice.

Posted by SeanBailey | Report as abusive

So we should just sit back and trust that they’ll take care of us? No thank you! As the saying goes, “Hope for the best, but plan for the worst.” I prefer to be proactive about my retirement – and I don’t think that is a pessemistic approach.


Posted by misd | Report as abusive

An interesting article but the reality is that, regardless of what the so-called ‘experts’ say, only senior corporate executivers and government workers will be able to retire and get a decent pension. For the rest of us, it’ll be ‘Tote that barge’ and ‘Lift that bale’ until we drop from exhaustion, but not too soon lest the government not get as much tax revenue out of us as they would like. Tax revenue needed, of course, to pay for all the lavish pensions promised to government workers.

Posted by Gotthardbahn | Report as abusive

[…] Will Social Security be there for today’s young workers? Learn more in my post this week at Reuters.com. […]

Posted by Will Social Security be there for younger workers? | RetirementRevised | Report as abusive

Thats funny, I thought I read on the news that this year, 2010, Social Security paid out more than it recevied in. Oh wait! I did

Thanks reuteurs! Bang up reporting!

Some examples, or you could just google it yourselves. Still trust the government actuaries?

http://money.cnn.com/2010/08/05/news/eco nomy/social_security_trustees_report/ind ex.htm

http://articles.moneycentral.msn.com/Tax es/blog/page.aspx?post=1731344

http://www.usatoday.com/money/economy/20 09-05-12-social-security-medicare_N.htm

http://www.nytimes.com/2010/03/25/busine ss/economy/25social.html?_r=1&hp

Posted by BHOlied | Report as abusive

One thing I didn’t see pointed out here is that the BEST reason SS will still be able to meet obligations is that by the time my generation retires (I’m 31) the retirement age will likely be 75 and many of those who would have bankrupted the system will already be dead (won’t draw down their SS). The pot will stay cushioned. And if they do collect, they will have worked longer and pumped more money in, and won’t be able to collect nearly as long. There – easy fix.

Posted by bodychex | Report as abusive

Scary thought that a simple tax increase on the wealthy could solve the entire problem, indefinatly.

Posted by Fishes | Report as abusive


Posted by Fishes | Report as abusive

Who would take financial/retirement advice from a 28 year old? That’s stupid.

Posted by josefski | Report as abusive

I really never expected to receive social security. I find the concept rather silly. I could never imagine living off the menial amount it would entitle me to. I don’t think anyone in particular is to blame, I thought this way back in 2004 when I graduated HS, and back in 2006 during my college years. It’s just something I thought little about. I will find success on my own, and retire when and live a simple life when I think it is time. These benefits do nothing but make us complacent.

Posted by GloboBenito | Report as abusive

It just makes common sense to plan for the worst case scenario. We can’t depend on the Government to provide for us. I think the 28 year old has it right on this one .

Posted by lorh | Report as abusive


Scary that a few simple tax increases could pay for a lot of stuff, its called SOCIALISM and those who pay taxes flee from it leaving lazy dependent people who create nothing (and fishes)

Yes so simple

Posted by BHOlied | Report as abusive

Social Security will be there when 18-34 year olds retire. There will be reforms. These reforms will put the retirement age up to around 80. So that there will be a lot more people paying in than collecting. Trusting Social Security for your retirement while also knowing that it is going broke is what I would call stupid. We know how they plan to fix it, they have done it before. You just wont be allowed to retire and collect until you are older.

Posted by Trooth | Report as abusive

I’m 63 and planning to start collecting next year, even though I expect to outlive the actuarial calculation. I try to avoid hiring workers as employees because I don’t think they will see any return on our shared sacrifice of FICA. The problem is not the SS trust fund; it’s the general fund, which is out of control. I expect the Feds to use some crisis (say a terrorist bombing of a major US city) to declare an emergency and spend down the trust fund. Oops. Too bad, it’s an emergency.

Posted by igiveup | Report as abusive

“Members of Congress will make sure of that, or they will be out of a job.”

By far the best fix for Social Security would be to put Congress on it like Joe SixPack and watch it become quietly solvent when it is no longer raided for pork projects. The practice of get-elected-once-get-paid-for-life is no longer sustainable with $Trillions of debt, besides our elected officials are NOT royalty.

Posted by PetePleterson | Report as abusive

Not only do they “Borrow” the money, but it must be “repaid” and we all get to “repay” it “again”. The real problem is that when you get a big pile of money the ‘Professional Parasites” descend. Also, when Social Security began it was sold to us as-you put the money you made into your account (social security no.) was your account number and when you retired you got your own money back. But, when the first guy retired they could not pay him because they had to take someone else’s money to pay him so it became a “tax”. The system needs to be eliminated. There will be pain but if you want to be free!

Posted by maxter | Report as abusive

[…] […]

Posted by Social Security not as broke as we thought | Report as abusive

It’s unfortunate that the younger generations are almost required to be more financially savvy than previous generations for the very reason that the system needs an overhaul. It’s simply not prepared to deal with longevity and market fluctuations. Younger generations are empowered enough to think differently and are looking at the U.S. financial system as a flop – not only has the SS crisis crumbled their hopes of retirement, but the financial crisis on Wall St. has crumbled their faith in big banks. Social Security, just like megabanks, needs to look at the way it’s been doing business and make change happen for a stronger and healthier future.

Posted by Kasasa | Report as abusive

[…] points, but some are way off base. Particularly the one about social security. Not actually Will Social Security be there for today’s young workers? | Analysis & Opinion | Meditation on inevitable death should be performed daily. And every day without fail one […]

Posted by 8 Nasty Conservative Lies About the Democrats and Obama That Must Be Debunked Before | Report as abusive

Soc. Sec. paid out more than it took in???? so where is MY MONEY…I have 7more yrs..and I have—according to the GOV. enough for me to retire NOW…where is it…where did MY money go…WHY is it not there??? what did you do with it..??? who did you give it too>>Google>taxes we pay< watch these CAREER politician CLOWNS..

Posted by rgw | Report as abusive

You do realize that actual NEWS coverage on this subject would be an investigative report on the amount of money spent by the investment industry on perpetuating the SocSec is dying story.

Posted by ARJTurgot2 | Report as abusive

[…] I will not receive what I have paid into it and thus will be cheated.  Some polls show that up to 76% of 18 to 34 year olds believe social security will not be around when they retire. With so many young people […]

Posted by Social Security Reform &laquo; CenterLinePolitics | Report as abusive