How the middle class feels
While the news of a funding shortfall isn’t new, a survey commissioned by the Transamerica Institute reveals what middle-class Americans think about Social Security’s funding shortfalls — and what should be done about it.
Nearly 7-in-10 middle-class Americans are confident in their ability to retire comfortably (21% very confident, 48% somewhat confident), according to the report, which defines middle class as those with a household income between $50,000 and $200,000.
Their greatest retirement fears? Outliving their savings and investments is tied for first place (at 40%) along with the fear of declining health that requires long-term care. But right on its heels is the fear that Social Security will be reduced or even cease to exist in the future — a concern cited by 39% of survey respondents.
And 65% say addressing Social Security’s funding shortfalls should be a top priority of Congress and the President (when it comes to ensuring financial security in retirement). This was ahead of addressing Medicare’s funding shortfalls (53%) and making out-of-pocket health care expenses and prescription drugs more affordable (50%).
They also had opinions on potential actions Congress could take to address this funding shortfall, such as increasing the maximum earnings that are subject to payroll taxes (41%), increasing the Social Security payroll tax rate (37%) and preserving retirement benefit payments for retirees in greatest need (31%). Only 4% said Congress should “do nothing,” and 24% agreed with raising the retirement age — while 22% said they “don’t know” what to do.
Discover How a Simple Decision Today Could Lead to an Extra $1.3 Million in Retirement
Learn how you can set yourself up for a more prosperous future by exploring why so many people who work with financial advisors retire with more wealth.
Discover the full story and see how you could be on the path to an extra $1.3 million in retirement.
Read MorePotential remedies
That could be one thing that middle-class Americans and policymakers agree on — they don’t know what to do. Raising the age Americans are able to start collecting full retirement benefits to be more in line with longer life spans — life expectancy in the U.S. is now 77.5 years — doesn’t seem like a popular option. Currently, full retirement age falls between 66 and 67 years of age.
Or, the Social Security Administration could increase the wage base limit, which means higher-income earners would pay more in payroll taxes. That may be a more popular option among middle-income earners than high-income earners. Another option could be to raise the payroll tax rate, but a tax hike would likely be a hard sell.
Social Security is meant to be a safety net to supplement retirement savings — not as a sole source of income in retirement. But according to the Transamerica report, 27% of middle-income Americans expect their primary source of retirement income will come from Social Security.
In the end, any approach taken by the government to reform Social Security may be deemed unpopular, which could explain why politicians have been hesitant to take action. Perhaps the answer lies in a more holistic approach.
“Solving Social Security’s funding shortfalls does not have a clear-cut solution in the eyes of the middle class,” Catherine Collinson, CEO and president of Transamerica Institute, said of the report’s findings. Rather, a “collective effort is needed among policymakers, industry, academics and individuals and families to implement lasting solutions.”
Sponsored
Invest in real estate without the headache of being a landlord
Imagine owning a portfolio of thousands of well-managed single family rentals or a collection of cutting-edge industrial warehouses. You can now gain access to a $1B portfolio of income-producing real estate assets designed to deliver long-term growth from the comforts of your couch.
The best part? You don’t have to be a millionaire and can start investing in minutes.
