Social Security Is More Important Than a Lot of People Realize

The 2015 Retirement Confidence Survey from the Employee Benefit Research Institute is out, and it shows the usual: hardly anyone thinks that Social Security benefits will remain stable in the future. They expect cuts, cuts, and more cuts.

This may be part of the explanation for the two charts on the right. If you ask current workers, only a third think that Social Security will be a major source of retirement income. But if you ask current retirees for a reality check, two-thirds report that Social Security is a major source of their retirement income.

Why the big difference? If workers think Social Security benefits are likely to be cut, that’s probably a part of the explanation. But a bigger part is almost certainly just invincible optimism. Current workers are sure they’re going to save enough, or get a big enough return on their 401(k), or get a big enough inheritance, or something—and this will see them through their retirement. Social Security? It’ll just be a little bit of extra pin money for fun and games.

But in reality, that’s not how it works. For most people, it turns out they don’t save nearly as much as they think, which in turn means that their little Social Security check is what keeps them solvent. If more people understood this, public acceptance of conservative plans to cut Social Security benefits would probably be a lot lower.