After 2020, a year of isolation and fears over the pandemic, it was initially assumed that Medicare and Social Security confidence would decrease. However, it seems the opposite is true and not only for retirees but current workers as well. While millions of households struggled financially and the economy went through a turbulent phase, optimism remains high for both of these programs.
Will Social Security pay the same benefits as time goes on? 53% of workers and 72% of retirees answered that they were ‘very or somewhat confident that this would be the case.’ Around three years ago, the results were 28% and 45% for workers and retirees, respectively.
What about Medicare? Well, you probably guessed from the introduction, but it was essentially the same outcome. Three years ago, only 34% of workers and 46% of retirees were confident in the program. In 2021, this increased to 56% and 75%, respectively.
Consistent Benefits
Despite the circumstances of 2020, including the collapse of the stock market and people forced to work from home, benefits remained consistent and steady. For many retirees, it was almost as if the pandemic was non-existent in terms of their Social Security income. Social Security is now considered a vital income source for over 60% of retirees, and benefits remained the same throughout the pandemic.
Furthermore, federal stimulus checks were also available for recipients of Social Security. While the first payment was $1,200 per person, the second and third were $600 and $1,400, respectively. We would never understate the impact of the pandemic and how it has affected millions of lives around the world, but, from Social Security’s perspective, little has changed.
In a recent EBRI survey, the same survey from which the aforementioned data was drawn, shows that retirees are more confident in their financial position compared to twelve months ago. In March 2020, 76% of respondents said they were confident of their financial position – this increased to 80% a year later in March 2021. Therefore, high optimism seems to be present right across workers and retirees.
Trust Funds
Of course, there’s a difference between the feelings of people and the reality of a situation. Just because people are confident doesn’t change the fact that the trust funds supporting Social Security benefits are under extreme pressure. Before the pandemic took hold, the Social Security Administration estimated 2035 as the year where the money effectively runs dry.
Although benefits wouldn’t necessarily stop immediately, less than 80% of benefits would remain as payroll taxes step in to fund certain amounts. One year later, over 500,000 people are dead, millions have either lost jobs or accepted fewer hours, and industries have suffered from temporary closures. Could this bring the Social Security extinction date forward? Lawmakers are doing everything they can to stop this from happening.
Why the optimism for retirees? For one thing, most retirees only have a small percentage of their portfolio invested in the stock market due to the conservative strategies. Secondly, most of the disposable income for older generations is spent on entertainment, travel, and leisure. With these three industries all but closed down over the last year, spending has likely decreased for retirees. Consequently, they have money sitting in accounts that otherwise wouldn’t have been there, thus boosting their financial position.
Varying Consequences for All
This being said, it’s fair to say that the pandemic and resulting recession have hit everybody differently. On the one hand, some people sit in a similar (or better) position to one year ago – this includes the rich and those with a college education. On the other hand, many still face job losses, which is a particular concern for those without a college education, the poor, and minorities.
There was some good news recently as the United States economy welcomed over 900,000 new jobs and reduced the unemployment rate to 6%. Compared to February 2020, however, over 8 million jobs have disappeared (and are yet to return).
Of all those who lost a job or hours due to the pandemic, only 40% said that their retirement was unaffected. For the other 60%, it has led to damaged retirement plans and savings. Of all those who didn’t lose income or work hours, seven out of eight people said their retirement plans were unaffected.
It’s an interesting time for both workers and retirees, and only time will tell how the COVID-19 generation recovers from one of the most prominent historical events in recent times. Despite all the doom and gloom, one thing is for sure, and that’s the fact that optimism is high for Medicare and Social Security. Can reality follow?
