FA Playbook

To save Social Security, we need to make it 'hip' with millennials

Jamie Hopkins, professor of retirement planning at The American College of Financial Services
Key Points
  • A Transamerica survey found that 81 percent of millennials polled believe that Social Security would not be around for them. Getting them to care is key to the program's survival.
  • Making Social Security more tangible to young workers can motivate them to recognize the program's importance in their own financial lives.
  • Appealing to millennials' sense of social reponsibility and meaning can help educate them on the importance of Social Security.
If young workers were to get annual statements showing that 12.4 percent of their earnings went into Social Security, it could spark a visceral reaction.
Eva-Katalin | E+ | Getty Images

Survey after survey reveals that millennials are resigned to the idea that Social Security, as we know it, might not be there by the time they reach retirement age. According to a Transamerica survey, 81 percent of millennials polled believe this to be true. This is in contrast to a 2011 survey, which found that only about 50 percent of millennials at that time didn't feel they would receive Social Security upon retirement.

It's safe to say that Social Security is facing an impending funding shortfall that threatens to cripple the future financial security of countless Americans.

The reality is that Social Security can be secured for future generations only by legislation passed by Congress to increase funding or change benefits. However, Social Security is not a hot-button issue for many millennials. The reason: Benefits of Social Security seem foreign and too distant to young workers.

Yet the future of Social Security hinges on energizing those millennials to be concerned about this dilemma. And the way to do this is by making the issues around fixing Social Security relatable to them.

Since millennials have demonstrated that they care deeply about social justice, equality and fairness, it seems to follow that they should care more about the future of Social Security. Millennials poll with strong support for Medicare for all and higher federal minimum wages, but they have not mustered the interest or the will to demand necessary improvements to the existing Social Security program. From a purely selfish perspective, they should be more motivated to protect their own financial futures — starting now.

More from FA Playbook:
What putting off retirement means for your Medicare
A viable 'mini retirement' takes some serious planning
How to retire early — very early

Getting millennials engaged and motivated has worked in the past. Just look at the recent ban on plastic drinking straws in 2018.

We have known about issues with plastic for decades, and who hasn't seen pictures of the massive garbage island floating around the Pacific Ocean for years? Yet it wasn't until the graphic video of a plastic straw being pulled out of a sea turtle's nostril went viral that there was a visceral reaction among America's youth, and the move to ban straws took the national conscience by storm. Millennials have also shown interest in other political areas, such as health care and student debt, which has pushed these issues into the political discussion.

Taking a page out of Nobel Laureate Daniel Kahneman's behavioral finance theory of decision-making might be one approach.

Kahneman defines two systems by which we think. The first system is the more intuitive, immediate part of our thinking, while system No. 2 is the kind of thinking that requires more concentration and effort. Recognizing that short-term, intuitive decision-making often wins out over longer-term, system-two type thinking, it follows that appealing to one's more reactive cognitive decision-making process could be the best way to get them to care about something — as with the viral video of the turtle.

In the case of Social Security, we need to appeal to millennials' intuition, and create a sense of immediacy about this benefit that is not there now. The analytical approach that has focused long-term speculation simply has not worked.

Employers could take the lead here, incentivizing younger employees to become more invested in the future of Social Security. Employers should provide employees with annual statements highlighting how much the employer has paid into Social Security that year and over the course of their employment.

Social Security used to provide annual paper statements but has since stopped. While many people do not look at their paystubs, they do look at their retirement savings balance in their 401(k) plans. By positioning Social Security as more of a savings system, this could create a greater feeling of attachment for the employee, along with a sense of ownership over their Social Security account.

For the average worker, employer-paid Social Security taxes are an undervalued and often unrecognized benefit of being employed. Furthermore, millennials already have paid a lot into Social Security, and it's not clear they recognize just how much. Promoting the disclosure of the company contribution might also benefit the employer.

The 6.2 percent paid by employers is probably greater than their contribution to an employee's 401(k) plan account.

If young workers were to get annual statements showing that 12.4 percent of their earnings went into Social Security — which is often more than into their 401(k) plan — it could spark that visceral reaction needed to create a real sense of connection.

As the youth of America become detached from the Social Security program, and as it falls out of the public eye, politicians will have more leeway to derail the current system.

A millennial earning $100,000 a year for the last decade already has paid approximately $124,000 in taxes to Social Security. A dramatic cut to the program would inflict real pain on any self-respecting millennial who has been a regular contributor to Social Security.

Another way to get millennials to care about Social Security is to expand the program into a system that could be tapped at an earlier year, designed to offset lost income after certain qualifying events, such as childbirth.

Some politicians, like Sen. Marco Rubio (R.-Fla.), have floated the idea of allowing new parents on maternity leave to have some access to Social Security. Expanding Social Security from retirement and disability benefits to also include maternity leave could trigger interest in the program for young workers looking to start families.

Flip the script

Of course, such an expansion of Social Security likely would require additional funding so as not to deplete future retirement benefits, but the point is to make Social Security an issue that impacts millennials lives now, not later.

Until the script is flipped, the resignation about Social Security on the part of millennials runs the risk of becoming a self-fulfilling prophecy and is not a focal point today of politicians running for office.

As the youth of America become detached from the Social Security program, and as it falls out of the public eye, politicians will have more leeway to derail the current system, putting most Americans at risk of an even less secure financial future.

Perhaps the best way to fix the problem is to regularly present millennials with a clearer vision of the significance of Social Security to their retirement futures and to warn them about the specter of a big hole in their retirement wallets if they fail to become invested in the sustainability of the program.

— By Jamie Hopkins, professor of retirement planning at The American College of Financial Services

WATCH: Women aren't saving enough for retirement

Women aren't saving enough for retirement
Women aren't saving enough for retirement

More In FA Playbook

Op-ed: Investors need to wait it out before snatching up software stocks
Op-ed: Here are 6 stocks with excellent vital signs in the health-care sector