Social Security is headed for serious trouble.
The reserves of the Social Security retirement trust fund are expected to be depleted by 2033, as we reported in “Here’s What Will Happen When Social Security and Medicare Funds Run Dry.”
Americans are aware of the program’s plight. Confidence in Social Security’s future has declined 7 percentage points since 2020, from 43% to 36%, according to a recent survey of more than 3,500 adults from AARP.
Among retired survey respondents, 65% said they rely on their Social Security income “in a substantial way.” And 96% of all respondents said the program is important.
But while Americans count on — and worry about — Social Security, the survey found they know surprisingly little about the financial standing of its retirement trust fund.
What is the retirement trust fund?
The Social Security retirement trust fund — technically known as the Old-Age and Survivors Insurance Trust Fund — pays benefits for retired workers, their spouses and their survivors.
In other words, if you receive Social Security retirement benefits based on your own work history or that of a spouse, your monthly payments come directly out of this trust fund.
The retirement trust fund itself is funded primarily by Social Security payroll taxes that come out of workers’ paychecks. Its reserves have been dwindling, however, because the number of retirees has increased considerably in recent years.
2 trust fund questions that stump Americans
As part of its survey, AARP asked respondents two multiple-choice questions about the retirement trust fund. A majority of respondents answered incorrectly.
The questions, and all multiple-choice answers, are as follows:
1. The Social Security Administration projects that the Social Security retirement trust fund will be exhausted in the next 10 years. Based on your understanding, does this mean that…
- Social Security will not be able to pay any benefits
- Social Security will be able to pay benefits at a reduced level
- It means neither of these things
- Don’t know
2. After the trust fund is exhausted, current workers will still be paying Social Security taxes and the Social Security Administration will be able to pay a percentage of retirement benefit amounts. About what percentage of total benefits do you think current taxes will be able to cover? Your best guess is fine.
- 0
- 1-10
- 11-20
- 21-30
- 31-40
- 41-50
- 51-60
- 61-70
- 71-80
- 81-90
- 91-100
The answers
Just 34% of survey respondents gave the correct answer to the first question: “Social Security will be able to pay benefits at a reduced level.”
For the second question, 47% incorrectly said Social Security payments would be cut by at least half if the retirement trust fund is depleted. In reality, the cut would be much smaller — but only a sliver of survey respondents knew this.
The failure of Americans to answer basic questions about the future of the Social Security retirement trust fund should be concerning, according to AARP. In a recap of the survey findings, AARP says:
“Even though a majority of Americans think they are informed about Social Security, most lack the knowledge necessary to make wise decisions about when to start receiving retirement payments.”
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