Think you know how to fix the Social Security deficit? Americans have mixed feelings about what to do

Social Security is headed toward a deficit by 2035, which is not good news for future retirees. In ten years, the program may only have the funds to pay up to 83% of planned benefits.

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That’s because Social Security pays out more than it brings in. That doesn’t mean future retirees won’t receive benefits, but those benefits would be cut — unless the U.S. government implements reforms.

How the middle class feels

While news of a funding shortfall is not new, a survey commissioned by the Transamerica Institute reveals what middle-class Americans think about Social Security’s funding shortfall — and what should be done about it.

Nearly 7 in 10 middle-class Americans are confident they can retire comfortably, according to the report (21% very confident, 48% somewhat confident). The middle class is defined as having a household income between $50,000 and $200,000.

Their biggest fears for retirement? Outliving their savings and investments comes first (40%), along with the fear of declining health requiring long-term care. But right behind them is the fear that Social Security will be cut or even eliminated in the future — a concern cited by 39% of survey respondents.

And 65% say addressing the Social Security funding shortfall should be a top priority for Congress and the President (when it comes to ensuring retirement financial security). This was ahead of addressing the Medicare funding shortfall (53%) and making out-of-pocket health care and prescription drug costs more affordable (50%).

They also had opinions on what actions Congress could take to address this funding gap: raising the maximum amount of income subject to payroll taxes (41%), raising the Social Security payroll tax rate (37%), and preserving retirement benefits for retirees who need them most (31%). Just 4% said Congress should do “nothing,” and 24% approved of raising the retirement age — while 22% said they “don’t know” what to do.

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Possible solutions

That may be something middle-class Americans and policymakers agree on: They don’t know what to do. Raise the age at which Americans can receive their full retirement benefits to be more consistent with longer lifespans: U.S. life expectancy is now around 77.5. That doesn’t seem like a popular option. Currently, the full retirement age is between 66 and 67.

Or the Social Security Administration could raise the wage base limit, meaning that higher-income earners would pay more in payroll taxes. That might be a more popular option among middle-income earners than among high-income earners. Another option would be to raise the payroll tax rate, but a tax hike would likely be a tough sell.

Social Security is intended to be a safety net to supplement retirement savings — not the sole source of income during retirement. But according to the Transamerica report, 27 percent of middle-income Americans expect their primary source of retirement income to come from Social Security.

Ultimately, any government approach to welfare reform could be seen as unpopular, which could explain why politicians are reluctant to take action. Perhaps the answer lies in a more holistic approach.

“Fixing Social Security’s funding gap doesn’t have a single solution in the eyes of the middle class,” Catherine Collinson, CEO and president of the Transamerica Institute, said of the report’s findings. Instead, it will take a “collective effort by policymakers, industry, academics, and individuals and families to implement lasting solutions.”

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This article provides information only and should not be taken as advice. It is provided without warranty of any kind.