Many Americans lack confidence that Social Security will be available to them when they need it, according to a new study by Northwestern Mutual. (iStock)
Many Americans are becoming increasingly concerned about whether Social Security will be there for them when they need it, a new study claims, as the ongoing COVID-19 pandemic disrupts their finances.
More than half of the adults surveyed (56%) in Northwestern Mutual's 2022 Planning and Progress Study say that they think Social Security "will be there when they need it," meaning just under half of Americans doubt funds will be there. The study found that Americans are adapting to a new financial normal as a result of the pandemic, and a whopping 60% say it's been "highly disruptive" to their personal financial situations.
About 48% of those surveyed said, though, that they've been able to adapt — but another 13% said they haven't been able to do so.
"This is an adaptation story – people have adjusted to the many ways the world has changed over the last two years and have emerged with some different financial priorities, habits and points of view," Northwestern Mutual Executive Vice President and Chief Customer Officer Christian Mitchell said. "But progress doesn't always follow a straight line – there's been a little wobble in people's behaviors compared to last year."
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Are Social Security funds running dry?
Americans who are unsure of how reliable Social Security funds are may not be wrong for their cautiousness. The Social Security Administration (SSA) announced in 2021 that it would reach its depletion date in about 12 years, but not completely run out of money.
The SSA could heavily slash benefits for retirees and beneficiaries if Congress doesn’t find a solution over that amount of time. It's also struggling to keep up with the millions of Americans that are leaving the workforce because of COVID-19, as well as Baby Boomers now reaching full retirement age.
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Social Security benefits could be reduced soon
As benefits run low, the SSA announced it will be forced to cut scheduled benefits by 20% after the depletion date in 2034, due to a lack of funds — sooner than the administration had previously forecasted.
That date was bumped up because of a drop in tax revenue by way of COVID-induced unemployment and labor shortages. Social Security funding dropped, even as it paid out benefits, with fewer people paying income tax in 2020.
Since consumers continue to pay into Social Security via their income tax, funds aren't expected to completely run dry. Instead, benefit amounts will need to be reduced by at least 20% to continue operating as more Americans reach full retirement age. Among several significant SSA changes this year, the full retirement age rose for the final time and will remain at 67 for those born after 1960.
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