Big Changes to Social Security Program May Add to Americans' Worries That Benefits May Not Be There When Needed

RBC Wealth Management Poll: Majority of Americans and more than two-thirds of GenXers don't believe benefits will be there for them

November 13, 2015-- /PRNewswire/ - While a majority of Americans say they will need to rely on Social Security benefits in retirement, most are not hopeful that those benefits will be there, according to a recent poll from RBC Wealth Management-U.S., conducted by Ipsos from October 6 to October 9, 2015.

The survey found that 72 percent of Americans think they will need to rely on Social Security in their retirement. However, regardless of their need, 55 percent are not confident that those benefits will be available when they need them.

"The message is clear: a majority of Americans are worried about their chances of receiving Social Security benefits in retirement," said John Taft, CEO of RBC Wealth Management-U.S. "With news this week that two popular Social Security claiming tactics have been eliminated, I can only imagine that anxiety will increase."

GenXers (ages 35 to 54) are the least confident that Social Security benefits will be available to them when they retire, the survey found. Of Americans in this age group, 67 percent said they do not believe Social Security benefits will be there, regardless of whether they need them or not. That compares to 55 percent of Millennials (ages 18 to 34) and 41 percent of Baby Boomers (ages 55 and older).

"It's alarming that such a high percentage of the next generation of retirees has essentially given up hope that they will receive Social Security benefits," said Griffin Geisler, manager of the Internal Wealth Center at RBC Wealth Management. 

"But despite significant changes to the program this fall, we are stressing to our clients that Social Security should continue to be an important piece of their retirement income pie."

The changes to the Social Security program are expected to have the biggest impact on Baby Boomers, the group most likely (83 percent) to think they will need to rely on benefits when they retire. 

Baby Boomers were also the group with greatest confidence that Social Security benefits will be available to them.

"With no cost-of-living increase, and the elimination of popular tactics like "file and suspend" and "restricted application", it's more important than ever that retirees work with their advisors to plan the best course of action," Geisler said. 

"While this survey echoes the concerns we hear from our clients, with the right strategy in place, Social Security will continue to play a significant role in assuring a comfortable retirement."

These are some of the findings of an Ipsos poll conducted on behalf of RBC from October 6 to October 9, 2015. For the survey, a sample of n=2009 Americans was interviewed online via Ipsos's American online panel.  The precision of Ipsos online surveys is measured using a Bayesian credibility interval.  In this case, with a sample of this size, the results are considered accurate to within +/- 2.5 percentage points, 19 times out of 20, of what they would have been had the sample universe of Americans been polled. The margin of error will be larger within sub-groupings of the survey population, for example, those who hold investments (n=805, +/- 3.9).

About RBC Wealth Management - U.S.

In the United States, RBC Wealth Management operates as a division of RBC Capital Markets, LLC. Founded in 1909, RBC Capital Markets, LLC. is a member of the New York Stock Exchange, the Financial Industry Regulatory Authority, the Securities Investor Protection Corporation, and other major securities exchanges.  RBC Wealth Management has $280 billion in total client assets with 1,900 financial advisors operating in 200 locations in 41 states. 

Five Things You Need to Know about Social Security

By Drew DeSilver

When President Franklin D. Roosevelt signed the Social Security Act into law 80 years ago this month, he said that while “[w]e can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life … we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.”

In the decades since then, Social Security has developed into one of the most popular federal programs, though that popularity is tempered by concern over its long-term financial outlook. 

In a 2014 Pew Research Center survey, for instance, 50% of Gen Xers and 51% of Millennials said they believed they would receive no Social Security benefits at all by the time they’re ready to retire. 

Earlier this year, 66% of Americans said taking steps to make Social Security financially sound should be a top priority for President Obama and Congress this year, placing it fifth among 23 issues asked about.

But any reform plan entailing cuts to benefits likely would face an uphill battle for public support. 

The 2014 Pew Research survey also found large majorities across all generations agreeing that Social Security benefits shouldn’t be reduced; even among Millennials, the generation furthest from retirement, only 37% said future benefit reductions should be considered.

There’s often considerable confusion as to just how Social Security works, which is perhaps not surprising given the program’s complexity. (The original 1935 Social Security Act was 29 pages long; the current law, much amended and expanded, runs nearly 2,600 printed pages.) Here’s a primer on the program:

1. Social Security touches more people than just about any other federal program. At the end of 2014, according to the most recent trustees’ report, some 59 million Americans were receiving retirement, disability or survivors’ benefits from the system; the total cost was $848.5 billion. 166 million people paid payroll taxes into the system.

2. Social Security is, and always has been, an inter-generational transfer of wealth. The taxes paid by today’s workers and their employers don’t go into dedicated individual accounts (although 32% of Americans think they do, according to the 2014 Pew Research survey). Nor do Social Security checks represent a return on invested capital, though you might be forgiven for thinking so since the “personalized Social Security statements” that used to be mailed out once a year and now are available online detail your payment history and projected monthly benefits. Rather, the benefits received by today’s retirees are funded by the taxes paid by today’s workers; when those workers retire, their benefits will be paid for by the next generation of workers’ taxes (caveat: see Point 3). Your benefit amount is based on your earnings history and age at retirement, not on how much you and your employer paid in Social Security taxes (although for most people, taxes paid are closely tied to their earnings).

3. Right now, Social Security has plenty of assets. For much of its history, Social Security was a strictly pay-as-you-go system, with current tax receipts funding current benefits. That changed in 1983, when Congress (as part of a comprehensive overhaul of the program) raised the payroll taxes that provide the bulk of Social Security’s revenue, to build up a cushion for the coming onslaught of Baby Boomer retirees. For nearly three decades, the system took in far more revenue than it paid out in benefits; the surplus was invested in special non-tradeable Treasury bonds, with interest credited to the system’s two trust funds (one for old-age and survivors’ benefits, the other for disability payments). As of July 31, those trust funds together held $2.83 trillion in Treasuries. (Some people characterize that as the government “borrowing from” or “raiding” Social Security, but the system is in essentially the same position as any other investor who buys Treasuries.)

4. But since 2010, Social Security’s cash expenses have exceeded its cash receipts. Negative cash flow last year was about $74 billion, according to the latest trustees’ report, and this year the gap is projected to be around $84 billion. While the credited interest on all those Treasuries is still more than enough to cover the shortfall, that will only be true until 2020. After that, Social Security will begin redeeming its hoard of Treasuries for cash to continue paying benefits – as was the plan all along.

5. Social Security’s combined reserves likely will be fully depleted by 2034, according to the trustees’ intermediate forecast. The disability-insurance trust fund could run dry as soon as the end of 2016, while the old-age and survivors’ fund is expected to be depleted in 2035 – assuming it’s not tapped to backfill the disability fund. (The Congressional Budget Office, in a separate report that uses somewhat different demographic assumptions, projects that the disability fund will be exhausted in fiscal 2017 and the old-age and survivors’ fund in calendar 2031; if the funds are combined, they would be exhausted in calendar 2029.) The exact depletion dates depend, of course, on future demographic and economic trends. After the reserves are exhausted, the system still will be receiving tax revenue, but it will only be enough to pay about three-quarters of scheduled benefits – unless Congress changes the benefit formulas, raises the payroll tax, or makes other changes such as raising the cap on taxable wage income (currently $118,500).

Social Security Turns 80, Loved by Americans of All Ages

Social Security Turns 80, Loved by Americans of All Ages Remains Key to Retirement, Living Independently, Important for Future Generations, According to AARP Survey

CHICAGO, Aug. 13, 2015 /PRNewswire-USNewswire/ -- AARP released results of a survey this week as we celebrate the 80th Anniversary of Social Security on August 14, 2015. Americans of all ages continue to have strong feelings of support for Social Security, and the survey found several key themes. According to the national survey of adults, Social Security remains a core part of retirement security, and remains popular across generations and political ideologies. Americans want to live independently, but face challenges around saving for retirement that underscore the importance of Social Security for future generations of beneficiaries.

"As we celebrate Social Security on its 80th anniversary, our survey found that it remains as important as ever to American families," said Ryan Gruenenfelder, AARP Illinois Advocacy Manager. "We also found that although most want to continue living independently as we age, obstacles to saving often continue to occur in our lives. However, Social Security continues to help generation after generation to diminish these obstacles."

In addition to the survey, the AARP Bulletin has stories this month about Social Security's history, its future, and what it's doing for Americans today.

Details on some of the Social Security survey key findings are below:

As a core part of retirement that remains popular, Americans say that they:

Rely on Social Security: 80% plan to rely on Social Security in a substantial way or rely on it somewhat. 33% say it is the source of income that they rely on or plan to rely on most during their retirement.

Believe in the importance of Social Security across political ideologies, generations: 66% say Social Security is one of the very most important government programs. This view has remained consistent over time in similar AARP surveys taken in 1995, 2005, and 2010.

Younger Americans also value the program. Specifically, 90% of adults under age 30 believe Social Security is an important government program, and 85% want to know it will be there when they retire.

Americans have a desire not to depend on others because they:

Want to live independently: 83% consider it extremely important to have the ability to live independently in their home for as long as they want, although 64% have concerns they won't be able to do so as they age. Additionally, while 68% feel it extremely important to have family around, 80% want to ensure self-sufficiency so their children and other relatives won't have to support them financially.

However, many people face challenges preparing for retirement including that they:

Have difficulty saving: Obstacles to saving include

69% have to focus on their current financial needs.

47% don't have enough money left over after paying their bills.

39% faced a major health need or problem in their family.

Worry about living in retirement:

68% express at least some concern that they won't have enough savings to last their lifetime.

69% express at least some concern about having a major health care expense that could wipe them out financially.

65% express at least some concern Social Security won't be enough for them to get by on.

For the Social Security 80th Anniversary survey, AARP commissioned GfK Roper, a national survey research firm, to conduct a national random telephone survey of 1,200 adults aged 18 or older on mobile and landline telephones. A total of 717 respondents were not retired and 483 were retired. Interviews were conducted from June 4 to June 28, 2015. The margin of sampling error for the random sample of 1,200 is +/- 3.6 points.

Note to reporters: Fact sheets from the AARP Public Policy Institute provide national and state data on Social Security as a key source of retirement income.

AARP is a nonprofit, nonpartisan organization, with a membership of nearly 38 million, that helps people turn their goals and dreams into real possibilities, strengthens communities and fights for the issues that matter most to families such as healthcare, employment and income security, retirement planning, affordable utilities and protection from financial abuse. We advocate for individuals in the marketplace by selecting products and services of high quality and value to carry the AARP name as well as help our members obtain discounts on a wide range of products, travel, and services.  A trusted source for lifestyle tips, news and educational information, AARP produces AARP The Magazine, the world's largest circulation magazine; AARP Bulletin; www.aarp.org; AARP TV & Radio; AARP Books; and AARP en Español, a Spanish-language website addressing the interests and needs of Hispanics. AARP does not endorse candidates for public office or make contributions to political campaigns or candidates.  The AARP Foundation is an affiliated charity that provides security, protection, and empowerment to older persons in need with support from thousands of volunteers, donors, and sponsors. AARP has staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Learn more at www.aarp.org.