08-08-2025
Americans Are Confused About How Social Security Works: Poll
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources.
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.
