Source: Wikimedia Commons user Gphgrd01.
For almost 75 years, Social Security has paid regular monthly
benefits funded by taxes collected by the program. Through the
years, tax rates have increased to help provide the money
necessary to pay an increasing number of Social Security
recipients, but the basic structure of the program has remained
much the same.
Yet amid the latest set of dour projections for Social
Security, one demographic has begun to voice its own opinions
about the program. It will be decades before millennials can
claim retirement benefits under Social Security, but they have
strong opinions about the future of the program and what must
happen to ensure its survival. Some of those opinions call for
major changes to Social Security as we know it, and the impact of
those proposals on retirees and those close to retirement could
lead to an intergenerational conflict about the program.
What millennials think about Social Security
The Reason Foundation and the Arthur N. Rupe Foundation
recently studied the opinions of millennials aged 18 to 29 on a
number of issues, and many of the respondents expressed
significant concerns about Social Security's future. More than
half of millennials surveyed said Social Security was unlikely to
exist at all by the time they reach full retirement age, with
only 45% believing the program will still be there when they need
Source: Flickr user itupictures.
Moreover, even among those who think Social Security will
survive over the next 40 to 50 years, few believe the program
will provide the benefits it pays to current retirees. Only about
a third of millennials think they'll receive the same benefits
Social Security pays now, while 64% express a lack of confidence
about future payout levels.
A controversial proposed fix: private accounts
Millennials aren't alone in their doubts about the financial
viability of the Social Security system over the long run, with
the most recent Social Security Trustees Report stating that the
program has less than 20 years left in which recipients can
expect full benefits when they retire. The Trustees Report
focused on working within the system to improve Social Security's
financial condition, with measures including further increases in
payroll taxes and various changes to future benefit calculations.
Meanwhile, millennials favor more substantial changes to Social
Security, including a controversial proposal to adopt private
accounts for investing money that currently goes toward Social
Security payroll taxes.
Source: Flickr user itupictures.
Specifically, almost three-quarters of millennials surveyed
believe Social Security should be changed to allow younger
workers to use private accounts to invest the money they
currently pay in Social Security taxes. By doing so, millennials
realize better returns
than they'd receive under the existing system, all while ensuring
that future changes to Social Security don't shortchange them
based on the taxes they've paid.
Obviously, shifting money from the current Social Security
system to private accounts would impact today's retirees, as a
reduction in tax revenue going toward paying current benefits
would lead to a much faster depletion of Social Security Trust
Fund reserves. Yet even after the survey explicitly asked
millennials about their views in light of the negative impact it
would have on traditional Social Security benefits for current
and future retirees, more than half still said they'd support
Do-it-yourself Social Security
The topic of private accounts has been the subject of intense
political debate, and a solution that reduces benefits for
current retirees seems very unlikely to be approved. Without a
major shift in political power, therefore, millennials aren't
likely to get the changes to Social Security that they seek. The
lesson that many millennials are learning here is that even as
they continue to pay Social Security payroll taxes, they also
need to set up their
private investing accounts to provide for their
Unfortunately, millennials aren't generally the most
comfortable with investments. According to a
millennials have more than half their assets in
, with just over a quarter invested in stocks. Interest rates are
currently so low that cash accounts are gradually losing
purchasing power to inflation, so millennials need to adjust
their investing strategy if they want to make the most of their
In the meantime, though, people of all ages should expect
continued tension between older and younger generations as the
Social Security situation evolves. So long as the program remains
financially endangered, Social Security will be a source of
uncertainty for everyone who expects to receive benefits from it
sooner or later.
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Millennials Want Big Social Security Changes.
Will They Get Them?
originally appeared on Fool.com.
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