Social Security: A Youthful Perspective

I read a statistic in the Journal of Financial Planning last month which stated that 19% of today’s workers know with accuracy when they’ll be eligible for social security benefits.* This statistic is of particular concern to me after similar findings in a recent study I conducted to determine just how much (or how little) people ages 18-30 really know about social security. I asked each of 30 people the same three questions, the answers from which tell us a lot about how younger audiences think and why. The first question I asked was where they had learned about social security issues in their lifetime. The next question was whether or not they ever worry about the current status of the system. Finally, I asked if they had any feelings about the idea of privatizing a portion of social security taxes. The people were chosen at random and range from friends and family to co-workers and strangers, most living in or around New York City.

When asked where each participant learned about social security, the most common response was from their parents. I found this interesting because my parents didn’t talk all that much about the system when I was growing up. I figured it was because nothing much needed to be said. The system was solvent, designed to protect older workers, and something dealt with primarily by that demographic. But that was only my experience. Many who were surveyed had gained the most information from a parent, a few of which had parents currently enrolling in the system. The second most popular source, volunteered by 8 participants, was school. Apparently high school history lessons which touch upon the Great Depression and FDR’s policy initiatives tend to have long lasting affects. Coming in third was news media as a source of information. Although, only 4 people responded that the news was their primary voice for social security issues. Many remember hearing buzz about the topic around the 2004 presidential election but never enough to illicit a response. Ironic, I find it, considering the generation I spoke with could possibly absorb the brunt of any policy changes which are in the workings. A handful of participants said they hadn’t given social security more than a minute or two of thought in their lifetimes. They felt that the issue was either too removed from their lives or not problematic enough yet to generate serious concern. I don’t know that I agree with this, but I can understand why people might think this way. Programs which affect people but don’t involve them in the operational structure (aside from paying tax) will obviously breed less awareness and more questions.
When asked about personal concern, very few people admitted to worrying about social security. While a basic knowledge was present with the majority of participants, only a handful of people were provoked enough by the subject to be concerned. One such participant was David Jacobs, a commercial real estate broker from Philadelphia. He said: “one fatal flaw is the constantly shifting population.” Jacobs went on to say “either younger people will have to pay more, or retirees will receive less.” The logic, for many of us, is quite simple. If nothing proactive is done, the problem will expose itself unevenly to a younger population which not only has a reduction in benefits, but pays in a disproportionate amount of tax. Others, like Adam Langsner of Great Neck, NY hold low expectations from the system: “if the benefits are reduced, I’ll have to save more. If the government offers a helping hand, I certainly wouldn’t mind.” Langsner went on to say that he’ll plan for his own retirement regardless of government assistance. Disregarding the government seemed to be a popular theme in my conversations. I would have thought otherwise considering the amount of social security tax paid in by the demographic in question. Many participants acknowledged not giving much thought about the direction of their tax dollars. “I generally pay my taxes and don’t ask too many questions” said Mark Fridman, a marketing manager from Jericho, NY. The amount of complacency I witnessed regarding social security issues shed some light for me on how small problems can easily snowball into larger ones: by turning a blind eye. I think a basic awareness could radically have changed the opinions of many people I spoke with.
When asked about earmarking a portion of social security taxes for individual accounts, the overwhelming majority thought this was a step in the right direction. According to Stacy Du, a client relations manager in New York City, “privatizing social security sounds like a good idea; I’m just not sure it would work for everyone.” Du’s opinion was reiterated by others as well. Gisoo Movtady, a law student, remarked: “Privatization is a very interesting idea. However, I think people might take on too much risk with retirement funds.” In fact, the bulk of concern regarding privatization was not whether or not the system sounded logical, rather how the new system would work in practice. Many of the same concerns regarding losing money in the stock market or withstanding recessions came up. Many surveyed were unaware that earmarking only a portion of social security taxes was even an option. They were also interested to learn about investment options that consisted of “conservative,” “moderate” and “aggressive” rather than the more confusing financial jargon associated with retirement plans and financial advertisements. As discovered in our prior question, education and awareness of what a privatized system would consist of seemed to be the largest lingering problem amongst participants.
My overall findings boil down to some simple conclusions. When asked about where social security was learned, the majority responded they had picked up bits of information from parents, school, and the media. Some, however, admitted to having only a very basic knowledge of how the system works. In terms of level of concern, the overwhelming majority recognized some need for concern, but didn’t really know why. A common sentiment was that social security issues were too far removed from people in their twenties and not yet a priority. In terms of privatization, most thought the proposal was logical but were cautiously optimistic about it. So, what can we do to raise awareness regarding social security and other related issues which could affect our younger population? It’s my feeling that these topics must be integrated more closely to curriculums at both the high school and college levels. We learned above that many younger people retain what they learn about social security from high school history lessons. Could we not expand these lessons to include the current questions and concerns we have in addition to the historical importance? I think this might raise awareness and help students better connect practice and theory. Also, rather than “promoting concern” we should promote involvement in the system to the extent that the concern naturally dissipates. This could involve the government sending out an information source, such as a newsletter geared specifically towards the younger generation. As far as the privatization question, I think solutions to broader problems regarding entitlement programs, including social security, could be found as part of an outreach program aimed at educating our younger generation. All of these ideas I think are attainable at the cost of some dedication and cooperation.
Russell Bailyn
Wealth Management
Premier Financial Advisors
14 E. 60th Street, #402
New York, NY 10022
212-752-4343 *31
*Journal of Financial Planning: October, 2006
Securities and certain investment advisory services offered through: FIrst Allied Securities, Inc., a registered Broker/Dealer. Member: NASD & SIPC. Premier Financial Advisors, Inc. is a Registered Investment Advisor. First Allied Securities & Premier Financial Advisors are not affiliated entities.

One thought on “Social Security: A Youthful Perspective”

  1. I’m really glad to come across this article. As it is, the government is essentially stealing from GenX and GenY, and there’s no guarantee that we’ll ever see that money again. This is an issue that is going to affect all 20- and 30-somethings, regardless of political affiliation — but it’s going to hit the middle class especially hard. I don’t understand why my monthly social security contribution couldn’t be invested very conservatively to give a 5% return. Seriously, I am sure private money managers (like you) could do even better. Why not turn that cash over to people who actually know what they’re doing? I agree that more education is necessary — and ultimately, we will need some political organization. Do you know of any groups out there?

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