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Social Security and Medicare: Will they Stand by Me?
Policymakers are beginning to debate what changes should be made to the Social Security and Medicare systems to ensure their long-term financial viability. Tough choices will eventually have to be made by policymakers who must answer to the voters.
Confidence in Social Security is Low.
- Sixty-eight percent of Americans are not confident Social Security will continue to provide benefits of equal value to the benefits received by retirees today.
- Only 12 percent of all workers expect Social Security to be their most important source of income.
- Only 5 percent of generation X'ers expect Social Security to be their most important source of income.
- While 12 percent of workers expect Social Security to be their most important sources of retirement income, 22 percent do not expect it to be a source at all.
- Thirty-six percent of generation X'ers do not expect Social Security to be a source of income at all.
Americans Do Not Understand Social Security's Problems.
- Thirty-six percent of Americans reported in the RCS that they are not confident that they have a good understanding of how the Social Security system works.
- Fifty-two percent of generation X'ers are not confident versus 23 percent of pre-boomers.
- Respondents were asked what they believe the term "trust fund exhaustion" means and were given two choices--(1) the system will be completely broke and unable to pay any benefits (false) or (2) the system will have fewer assets and will have to pay out benefits at a reduced level (true).
- Thirty percent of Americans incorrectly chose (1) (in addition, 12 percent responded that they do not know).
- The younger the person the more likely an incorrect answer. Forty-eight percent of generation X'ers chose (1) versus 18 percent of pre-boomers.
Social Security Taxes versus Benefits.
The 1997 RCS asked respondents to make tough choices assuming changes must be made to the system. When forced to choose between higher taxes or decreased benefits:
- Sixty-three percent of Americans chose increased Social Security payroll taxes for workers; 32 percent chose reduced benefit levels for retirees.
- The majority of each generation chose increased payroll taxes.
- Sixty-seven percent of women chose increased payroll taxes, compared with 58 percent of men.
- Among those favoring benefit cuts, where to cut was fairly evenly split:
--33 percent favored raising the age for full retirement benefits to 70.
--37 percent favored reducing automatic cost-of-living adjustments (COLAs) that occur with inflation.
--26 percent favored cutting benefits for all recipients.
Respondents Are Worried about Medicare.
- Sixty-seven percent of Americans are not confident that the Medicare system will continue to provide benefits of equal value to benefits received by today's retirees.
- Forty-six percent of workers do not believe that the Medicare program will still be providing health insurance when they retire.
- Fifty-one percent of women do not believe Medicare will still be there, compared with 41 percent of men.
- Sixty-four percent of generation X'ers feel this way, compared with 55 percent of late boomers, 42 percent of early boomers, and 21 percent of pre-boomers.
- Thirty-six percent of workers are not confident that they will have enough money to take care of medical expenses when they retire.
HMO, Higher Taxes, or Later Eligibility?
How should we reform Medicare? When forced to choose, the answers were similar across generations. However, retirees and workers had very different responses when forced to choose among options.
- The most preferred reform was changing Medicare to resemble a health maintenance organization (HMO) by using a restricted network of health care providers, followed by increasing the eligibility age for Medicare benefits from age 65 to age 67, followed by increasing payroll taxes for current workers.
- Retirees consistently showed a lower preference for HMOs than workers. When asked to choose between increasing payroll taxes for current workers or changing the system to resemble a restricted network HMO, 66 percent of workers versus 39 percent of retirees preferred the HMO. When asked to choose between increasing eligibility from age 65 to age 67 or changing the system to resemble a restricted network HMO, 65 percent of workers chose the HMO versus only 34 percent of retirees.
Source: 1997 Retirement Confidence Survey.
- 401(k) Valuations Published: October 2, 2014 401(k) Balances and Changes Due to Market Volatility
- Data Book Last Updated: February 2013 A comprehensive collection of the most up-to-date benefit information available