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The Boomers’ Gnawing Worry About Social Security

They're growing fearful that their promised benefits will be cut


When the Presidential candidates dare to talk about shoring up Social Security, they typically say that people in their 50s and older needn’t worry — their benefits won’t be reduced to keep the system solvent. But boomers (who are age 51 to 69) aren’t buying it.

In fact, based on two recent surveys I’ve seen (from the Hearts & Wallets financial services research firm and Transamerica Center for Retirement Studies), workers in their 50s and 60s as well as retirees are increasingly worried that their Social Security retirement benefits might be cut — just when they’re counting on them.

The Government ‘Can Change Anything’

“I’m a Gen X’er and I don’t think the boomers’ fears are overstated,” said Laura Varas, a principal at Hearts & Wallets. “The government can change anything at any time.”

The Hearts and Wallets survey, Investor Mindset: Attitudes, Concerns, Beliefs & Goals, asked 5,365 U.S. households whether they agreed with this statement: “I feel confident I’ll receive the Social Security benefits promised me.” Just 51 percent of pre-retirees (households whose primary breadwinner plans to retire within five years) and 51 percent of post-retirees (ones where the primary breadwinner has stopped working full-time) felt confident about getting their promised Social Security benefits. That’s down from 53 percent and 55 percent a year ago, respectively. Overall, just 37 percent of U.S. households felt confident they’d get the Social Security they’re due (down from 39 percent in 2014).

“We’re hearing more about this concern lately,” said Varas. “We’ve also been doing focus groups with older investors and are hearing a lot about their concern that Social Security might be means-tested [reducing and perhaps eliminating the retirement benefits for high-income recipients]. Higher-income people are the ones who’ve paid the most into Social Security.”

If something happens [to retirees’ Social Security benefits], they won’t be in a position where they can readily pick up and go find employment.

— Catherine Collinson, Transamerica

And when Transamerica just asked 4,203 retirees and workers age 50 and older for their greatest fears about retirement — in The Current State of Retirement: Pre-Retiree Expectations and Retiree Realities  — 44 percent of retirees and 33 percent of workers 50+ said one was that “Social Security will be reduced or cease to exist in the future.”

In fact, this was the No. 1 fear of retirees surveyed, tied with a fear of “declining health that requires long-term care.” Among the pre-retirees, the Social Security fear was No. 3, after “outliving my savings and investments” and “declining health that requires long-term care.”

This finding echoes an earlier Transamerica survey, where 76 percent of workers in their 50s and 40 percent of workers in their 60s said “I am concerned that when I am ready to retire, Social Security will not be there for me.”

Primary Source of Retirement Income

A key reason the chance of a Social Security benefit cut is so scary to pre-retirees: many expect Social Security to be their primary source of retirement income — 61 percent of retirees and 37 percent of age 50+ workers think so, according to Transamerica. In 2007, just 26 percent of boomers expected Social Security to be their primary source of retirement income.

“If something happens [to retirees’ Social Security benefits], they won’t be in a position where they can readily pick up and go find employment,” said Catherine Collinson, president of the Transamerica Center for Retirement Studies.

Why are so many more boomers now anticipating being so Social Security dependent? “Many are encountering potential saving shortfalls as retirement age nears,” said Collinson. “Many are also still recovering from financial setbacks encountered during the Great Recession.”

The Recent Backroom Deal Over Social Security

I should mention that both of these surveys were conducted before October’s backroom budget deal by Congress and President Obama that reduced Social Security benefits by tens of thousands of dollars for some boomer couples.

As you’ve likely heard, with no notice or public discussion, the politicians limited the “file and suspend” strategy for everyone who’ll be younger than 66 by the end of April 2015 and eliminated a way to claim spousal benefits for people who’ll be under 62 by the end of 2015. The explanation: “loophole closing.”

Incidentally: Social Security’s chief actuary told Congress that these claiming strategy restrictions will have no effect on when the Social Security trust fund will be depleted (now anticipated to happen in 2034).

Said Varas: “We heard about [the file and suspend change] in almost every one of our recent focus groups. It would have been better to give people two or three years of warning. Having the rug pulled out from them really frightened consumers.”

Why Boomers Are Getting Worried

Varas and Collinson think boomers are growing increasingly worried about their Social Security benefits partly because each year brings us closer to when the Social Security trust fund is estimated to be exhausted. (After that, Social Security could pay three-fourths of scheduled benefits.)

“We all read the headlines about Social Security’s solvency, and where there is uncertainty, there will be anxiety,” said Collinson.

And Varas thinks the rising skepticism over receiving promised Social Security benefits may lead more people to start claiming Social Security as early as they can — age 62 (the most popular claiming age) — giving up the delayed-retirement credits that increase Social Security 8 percent a year (until age 70).

I call this the “hit by a bus” scenario: Many people choose to claim Social Security on the early side to ensure they’ll get some benefits before they die.

A New, Helpful Tool About Claiming Benefits

Which reminds me: To see how the age you start claiming Social Security will affect how much you’ll receive in benefits — barring any changes from Washington — try out the new free Consumer Financial Protection Bureau’s Planning for Retirement — Before You Claim online calculator.

You may not be able to prevent unknowable changes in your promised Social Security benefits, but you can plan for what you’re entitled to get — as of now.

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