Americans Are Confused About How Social Security Works: Poll
A new poll has found there is widespread confusion among Americans about the fundamentals of Social Security—the cornerstone of retirement income for millions in U.S.
Over half of respondents (55 percent) in the Cato Institute's August 2025 Social Security Survey, conducted by Morning Consult with 2,200 Americans, said that they do not know how the retirement benefits system is funded, despite its central role in retirement planning.
Forty-five percent of those surveyed correctly noted that today's workforce pays Social Security taxes that fund benefits for current retirees and that future workers will do the same for their generation. Nearly a quarter (23 percent) said they mistakenly believe that their Social Security taxes are saved in a personal account that is exclusively for them, while 32 percent said they don't know how the system is financed at all.
When it comes to how benefits are calculated, there is also some confusion. While 60 percent said they recognize that workers who pay more into Social Security receive larger benefits, 15 percent incorrectly think that all retirees get the same amount and another 25 percent said they are unsure.
When it comes to the scale of Social Security benefits, there is still a significant knowledge gap. An overwhelming 91 percent of respondents were unaware that the maximum annual benefit can reach $60,000 per year. The average monthly benefit is $2,005.05 as of June 2025—netting just over $24,000 a year before any taxation.
However, only 25 percent correctly estimated that the average benefit falls between $20,000 and $29,000 per year. Meanwhile, 38 percent underestimated the average benefit amount, 17 percent overestimated it, and 19 percent said they were unsure.
A Social Security card with U.S. Dollars.
A Social Security card with U.S. Dollars.
GETTY
How Is Social Security Funded?
Social Security operates on a "pay-as-you-go" system funded primarily through payroll taxes collected under the Federal Insurance Contributions Act (FICA). Workers and their employers each contribute 6.2 percent of wages, up to a taxable earnings cap ($168,000 in 2025), which goes into the Social Security Trust Fund. These funds are then used to pay monthly benefits to current retirees, survivors and disabled beneficiaries.
The program is designed so that today's workers essentially fund the benefits of today's retirees, with the expectation that future workers will do the same for them when they retire.
Funding of Social Security has often been considered a "third rail" issue in American politics, meaning that targeting it for notable cuts or changes could be politically perilous to members of either party.
The program is expected to run out of funds in the coming years if no action is taken by Congress. According to the latest Social Security Trustees report, the program's two trust funds—the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) funds—are projected to reach insolvency by 2034. If no solution is found, benefits would rely entirely on incoming payroll taxes, resulting in shortfalls of approximately 21 percent.
This is not the first time Social Security has faced a financial cliff. In the early 1980s, the trust funds also approached insolvency. In response, Congress enacted a series of reforms, including accelerating payroll tax hikes, gradually increasing the retirement age, and taxing a portion of Social Security benefits.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Hill
an hour ago
- The Hill
Dismantling the Justice Department tax division will cost us billions
The Department of Justice is poised to make a grave mistake: dismantling its tax division, America's frontline defense against ultra-wealthy tax cheats. As sophisticated tax fraud surges, gutting this division would severely weaken enforcement and deterrence, inviting more evasion by the ultra-wealthy. It would send a message to those at the top: complex evasion schemes will go unpunished. Tax enforcement in the U.S. is already on life support, with tax evasion costing U.S. taxpayers approximately $447 billion each year, a figure that dwarfs popular claims of government waste. Yet fraud prosecutions haven't just declined over the last decade; they've collapsed, dropping nearly 50 percent between 2014 and 2023. Shockingly few big-time tax evaders face justice, with only 363 individuals convicted of criminal tax fraud in 2023. As one IRS investigator candidly told us, 'There's never been a better time to commit tax fraud.' Without a Department of Justice tax division, that is bound to get much worse. The stakes could not be clearer. Consider a few recent successes from the tax division's record. In the Anderson Ark case, the division unraveled an offshore evasion scheme, recovering nearly $100 million for taxpayers and shutting down a fraud operation that victimized thousands of Americans. It also secured a stunning $2.6 billion plea deal from Credit Suisse for its role in helping wealthy Americans evade taxes. In the ongoing case involving the late billionaire Robert Brockman, prosecutors are pursuing more than $1.4 billion in taxes and penalties from alleged offshore income, making it the largest individual tax fraud indictment in U.S. history. These cases highlight the tax division's extraordinary value. Its specialized prosecutors consistently recover far more than the division's modest $106 million budget, making it one of the federal government's smartest investments. The Credit Suisse settlement alone recovered more than the division spent in two decades. This is exactly the kind of return taxpayers deserve. Without a centralized tax division, complex cases like these will likely go unseen and unprosecuted. For example, cases like Anderson Ark, which span the country and extend overseas are likely to be ignored by regional U.S. Attorneys' offices, which are focused on local priorities. The biggest, most complex cases require concentrated expertise, along with the resources and institutional attention span that regional offices lack. The Brockman case alone required five expert prosecutors over seven years. Distributing elite tax litigation specialists to regional offices, where they'll be assigned cases outside their expertise, isn't just inefficient. It's demoralizing. Some of the tax division's top prosecutors have already resigned in anticipation of the restructuring. The inevitable result is emboldened tax evaders and billions in lost revenue and penalties. It also sends a clear message to taxpayers: The Department of Justice is no longer cultivating the deep expertise needed to prosecute complex tax fraud. If your scheme is sophisticated enough, you will likely get away with it. If you are ever indicted, you will fight it, knowing the Department of Justice lacks the focus and firepower to win. Our tax system fundamentally depends on voluntary compliance and public trust. Weak enforcement threatens both. The top 1 percent already evade taxes at three times the rate of taxpayers in the bottom half of the income scale. The automated matching systems the IRS relies on aren't designed to catch billionaires; they disproportionately target middle-income earners with straightforward returns. Catching sophisticated tax evaders requires equally sophisticated enforcement, precisely what a robust, centralized tax division provides. Without it, wealthy tax cheats will increasingly view evasion as a low-risk gamble, leaving billions unpaid and forcing ordinary Americans to cover the difference. Congress and Department of Justice leadership must recognize what is at stake and reverse course. The tax division is not just another bureaucratic unit. It is America's strongest defense against sophisticated tax fraud and financial crime. The division deserves reinforcement, not dismantling. This isn't a political issue, but one of fundamental fairness. Preserving and strengthening the tax division will uphold justice, reinforce public trust and save taxpayers billions. Corey Smith, a 33-year Department of Justice tax division veteran, led the Brockman criminal prosecution as senior counsel. Jens Heycke is the author of 'Death, Taxes, and Turduckens: Unraveling History's Biggest Tax Heist and the Broken System That Enabled It.'
USA Today
2 hours ago
- USA Today
Changing jobs? How to protect your 401(k) from hidden fees
If you're not careful, 401(k) fees can eat away at your retirement savings. Here's what to know. A U.S. Government Accountability Office study reported that 41% of American workers are unaware that 401(k) plans carry fees. Yet these fees can cost a workers thousands (and thousands) of dollars throughout their working years, leaving them with smaller retirement accounts than expected. It's common to lose track of fees when deciding whether to roll your existing 401(k) over or leave it where it is. However, it's essential to know how much you're paying in 401(k) fees and the effect they'll have on your retirement account. Here's what you need to know about 401(k) fees when changing jobs, where to find them, and how to control them. If you're not changing jobs, these tips can help you take control of an existing 401(k) and the amount you're paying out in fees. 401(k) fees add up If you're changing jobs, it's possible that your old employer paid your retirement account fees on your behalf while you worked there. However, once you move on from the job, it's unlikely that the company will continue to cover those fees. If that's the case, your old retirement account may be exposed to fees you know nothing about. Let's say one of the fees you're suddenly responsible for paying is a $4.55 monthly non-employee account maintenance fee. You could lose $17,905 in fees throughout your career. More: Americans believe this is the No. 1 obstacle to saving for retirement Get a copy of your 401(k) fee schedule Whether it's an old account managed by a former employer or an account you're opening with your new employer, you need to know exactly where to find fee information. A fee schedule is typically buried deep in the 401(k) plan document, making it difficult to find. Knowing what to look for is the key. Your employer must provide documents detailing how much you're paying in fees. The fee-specific document is often called the 401(a)(5) fee disclosure, although it may have another name. If you don't have a copy somewhere at home, you can typically find it on your plan's website or through your company's human resources department. What to look for 401(k) plans label their fees with a variety of names. Here are some of the most common names: As you review the Participant Fee Disclosure, note any terms that suggest a fee. How to know if you're paying too much All 401(k) plans charge fees, and you can't avoid paying them. However, there are steps you can take to keep your costs to a minimum. 401(k) fees usually range from 0.5% to 2% or more of plan assets annually. If the fees associated with your retirement account are more than 0.5%, you're probably paying too much. The chunk of money going to fees each year represents money you could have kept in your retirement account and allowed to grow. What you can do to control 401(k) fees While you won't find a prospectus that covers your 401(k) as a whole, you will find individual prospectuses for each fund in your 401(k). A prospectus is a document that gives you detailed information about each investment, including objectives, expected outcomes, risks, and fees. Most plan administrators provide these documents online. If not, contact your 401(k) administrator or HR department. You may not be able to eliminate fees entirely, but here's what you can do to reduce them: 401(k) fees may not actually be "hidden," but they can definitely be a challenge to find. Knowing how to find them could be your superpower, your way of redirecting money once spent on fees toward investments. The Motley Fool has a disclosure policy. The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY. The $23,760 Social Security bonus most retirees completely overlook Offer from the Motley Fool: If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets"could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. JoinStock Advisorto learn more about these strategies. View the "Social Security secrets" »
The Hill
3 hours ago
- The Hill
GM's quarterly results illustrate the folly of tariffs
General Motors, a cornerstone of American industry, is suffering the consequences of President Trump's unconstitutional 25 percent tariffs on imported vehicles and auto parts. In the second quarter of 2025, GM suffered a $1.1 billion tariff blow to its operating income, slashing the company's profit margin from a healthy 9 percent to just 6.1 percent. Net income plunged by 36.1 percent from the prior quarter and by a staggering 40.7 percent compared to a year ago. Although the estimated tariff impact for the full year of $4 billion to $5 billion is less than 3 percent of GM's overall revenue, that cost represents more than half of the typical annual income for the company over the past decade. The consequences extend far beyond GM's balance sheet. Tariffs, paid by importers to the federal government, are partly absorbed by companies and partly passed to consumers. We've especially seen this in import-sensitive sectors including furnishings, appliances, clothes and toys. Men's shirts and sweaters, for instance, rose 4.9 percent in June alone. When businesses 'eat' the cost, as GM tried to do last quarter, the fallout is no less severe. Diminished earnings mean less capital for investment in better technology or expanded operations, slowing broader economic growth, fewer resources for pay raises or new jobs — hardly the boon for workers that tariff advocates promise. The data confirms this. Nationwide, 14,000 manufacturing jobs disappeared in the past two months, erasing all gains in 2025. In June, real average weekly earnings dropped by 0.4 percent, an annualized loss of nearly 5 percent. Shareholders are also feeling the pinch. Stock valuations track a company's expected future earnings. Since 2012, GM's stock price increased by more than 200 percent. GM's price-to-earnings ratio today stands at 6.83, almost identical to 2012 levels. Stock prices increased alongside earnings. A sustained $5 billion annual hit, wiping out over half of GM's annual net income, could erase more than $20 billion in market capitalization if valuations adjust. With tariffs eroding profits, is it any wonder that GM's stock has slid 8 percent since its post-2024 election peak and now languishes 13 percent off its 2021 highs? This affects millions of middle-class Americans and retirees with pensions and savings invested. More broadly, lower dividends and diminished returns discourage investment, starving companies of the capital needed to expand. The result: slower growth, fewer jobs and weaker wage gains. GM, to its credit, is fighting to offset 30 percent of this burden by boosting U.S. production, cutting costs and increasing domestic content to comply with the USMCA trade agreement's labyrinthine rules. Yet even if successful, the net impact of $2.8 billion to $3.5 billion will devour a significant slice of GM's already thin margins. Profit margins at GM — as in most other sectors — are far less than conventional wisdom. GM's net profit margin over the past decade has averaged less than 5 percent. In other words, a $30,000 vehicle yields less than $1,500 in profit. GM's plans to shift some production to U.S. plants and rework supply chains is a testament to private enterprise's resilience. But make no mistake: These shifts sacrifice efficiency for compliance. Restructuring operations in a free market in pursuit of efficiency yields more profit, consumer benefit and economic growth. Doing so under duress to escape arbitrary tariffs may result in survival, but without these benefits. Resources that could have fueled innovation or lowered prices are now squandered on navigating artificial trade barriers. As an important sidenote, roughly half the tariff's cost stems from GM's South Korean operations, a stark reminder of the folly of taxing trade with allies. Rather than strengthening ties with democratic partners through bold free-trade agreements, these tariffs risk pushing nations like South Korea toward China, America's chief adversary. Far from economic strategy, it is geopolitical shortsightedness. Politicians sometimes prefer tariffs to other forms of taxation because they are less visible than taxes on income or sales. This makes it easier to dodge accountability by blaming 'greedy' corporations. For this reason, Trump called Jeff Bezos to deter Amazon from listing tariff costs on purchases. The White House press secretary labeled this a 'hostile and political act by Amazon.' Regardless, protectionism is not cost-free. Sustained tariffs will raise prices, shrink profits, erode real wages and slow economic growth. GM's quarterly results are a warning.
