Only 30% of Savers Know About Social Security Shortfall Projections

According to a survey published by the Peter G. Peterson Foundation, only 30% of Americans know that the Social Security Old Age and Survivors Insurance Fund is projected to become insolvent in 2033.  

Once made aware of the cuts, 97% of those respondents agreed that leaders elected in November of this year should take action to help shore up the funds, a think tank focused on addressing fiscal challenges including the national debt. Social Security has already been a talking point for both presidential candidates, and was a subject of President Joe Biden’s State of the Union Address earlier this year.

According to the Social Security Administration’s 2024 Trustee Report, the OASI Fund on its own is projected to have to cut benefits by 21% in 2033 when it exhausts its reserves. The combined asset reserves of the OASI and Disability Insurance Trust Funds are forecast to have enough revenue to pay all benefits and associated administrative costs until 2035, one year more than projected last year for the combined funds. The fund has been running a deficit since 2010 and spending down the reserves of past surpluses to make up the difference.

The online survey involved 1,000 participants, polled on May 21 and 22, or about two weeks after the 2024 Trustee Report was published.

This 21% cut would be automatic once the fund has used up those reserves. Given that most Americans are unaware of this contingency, they are left unable to prepare since one cannot plan for a possibility they are unfamiliar with.

Whatever one’s risk tolerance, modeling Social Security cuts is widely recommended by financial planners to a wide range of clients, according to Robert Pagliarini, an ambassador with the CFP Board and the president of Pacifica Wealth.

Younger workers would be the most affected by Social Security cuts, since those cuts will likely only increase over time as life expectancy increases, Pagliarini notes. However, younger workers also have more time to take corrective action.

Many financial planners recommend that their clients account for the possibility of Social Security cuts using various models to forecast different outcomes. Such models can include small tweaks, such as increasing  a client’s retirement age. They can also include a situation in which no reforms are made and Social Security is cut by 21% or more.

But corrective action requires awareness of the problem in the first place.