A Retirement Uprising Could Be on the Cards

• The U.S. could face the same level of protests as France if lawmakers in America attempt to make similar changes to retirement rules.
• Millions of French citizens have taken to the streets over President Emmanuel Macron's pension reform, which raises the retirement age from 62 to 64.
• Recent forecasts expect Social Security's trust funds to be depleted by 2033, putting U.S. pension payouts at risk.
• A majority of Americans polled for Newsweek can imagine a scenario where people protest against pension reform in the U.S.

For the past two-and-a-half months, millions of people in France have taken to the streets to protest against Emmanuel Macron's push to raise the retirement age from 62 to 64. Could similar chaos unfold in the U.S. if, as many fear, the country's Social Security becomes insolvent?

The French president said the unpopular reform is needed to balance the country's pension system over the coming years, as the French population ages. But the highly contested plan has been met with weeks of strikes, demonstrations, and even violent riots—to the point that Britain's King Charles recently canceled a much-anticipated visit to the country.

France is not the only country facing this likely lose-lose situation. An estimated 67 million Americans currently rely on Social Security for the monthly payments to sustain them through their retirement, and this number is expected to grow rapidly.

It is unlikely that the looming Social Security crisis could be resolved by raising the retirement age in the U.S., considering that, at 67, it is already among the highest in the world and that such a reform would be deeply unpopular.

Majority in Poll Can Imagine Similar Protests in U.S.

An exclusive poll conducted by Redfield & Wilton Strategies on behalf of Newsweek on April 4 found that 39 percent of Americans supported the pension reform protests in France, and 55 percent could imagine a scenario in which similar protests erupt in America. The company sampled 1,500 eligible voters in the U.S.

Asked whether "it is right that, as people live longer, they should be expected to work longer," 37 percent of respondents said they either disagreed or strongly disagreed. Some 36 percent either agreed or strongly agreed that Americans should work for longer years if they live longer. Some 24 percent have not yet made up their mind about the issue.

Some 49 percent of the poll's respondents believe that the retirement age in the U.S., at 67, is already "too high." Only 10 percent believe it is too low, while 34 percent think it's "about right" and 7 percent have no idea.

A recent report from the Administration on Aging found that more than one in six Americans were 65 or older in 2020—35 percent more than a decade earlier. The group predicts that the elderly population (65 and older) in the U.S. will climb to roughly 80.8 million people in 2040, more than double their number in 2000.

Meanwhile, many have raised the alarm over the country's retirement system becoming insolvent soon. The nonpartisan Congressional Budget Office (CBO) recently released its Social Security projections which found that the trust funds used to support the program could theoretically be depleted by 2033.

What's the State of Social Security?

Ida Rademacher, vice president at the Aspen Institute and co-executive director of the Aspen Financial Security Program, pointed out that "it's important to know that Social Security, while it's facing serious issues, it's not going to completely cut benefits."

"When we talk about that insolvency issue, it means that there is a need to think about the reduction in benefits that would happen if we don't make a change, but it would not annihilate the program," she told Newsweek.

But the reduction in benefits would be significant, experts agree.

"Social Security faces a looming financial shortfall," Richard Johnson, director of the Program on Retirement Policy at the Urban Institute, a Washington-based think tank, told Newsweek.

"Social Security benefits now exceed Social Security revenues. That shortfall is being made up by the program trust fund, which accumulated over the past four decades. But unless federal policymakers take action, the trust fund will run out in 2033, and Social Security will be able to pay only about 80 percent of scheduled benefits."

"The trust funds are scheduled to be depleted in 2033—that's 10 years away from now," Jason Fichtner, VP and chief economist at the Washington-based think tank Bipartisan Policy Center, told Newsweek.

"If Congress does nothing—and right now, Congress is very good at doing nothing—to reform the system, no security, by default will have a 25 percent cut in benefits that will hit current retirees. I don't think any Congress, whether it's Republican or Democratic, is going to let beneficiaries pick a 25 percent haircut overnight."

Social Security More Important for Retirement Income

Richard Fiesta, executive director at the Alliance for Retired Americans, said that a downfall of Social Security is likely to hit millions of American retirees hard, especially as the program has become an increasingly important source of income for retired people in recent years.

"Social Security is increasingly an important part of retirement income," he told Newsweek. "And that is unfortunately due to the decline over the last 30 or 40 years of separate pensions from one's workplace, as well as a lower savings rate into retirement. So Social Security has become more important for retirement income, unfortunately, because of declines in other sources."

He added that his organization is very concerned about a possible insolvency of the retirement program.

"I do not think raising the retirement age above the current 67 is going to be at all politically popular, and people who proposed that would see a backlash," Fiesta said. "Just last week, AP-NORC released a poll that showed that about 75 percent of all Americans—and that's regardless of party or age—oppose raising the eligibility age from 67 to 70. Our own data over the last decade show that the most unpopular change proposal to Social Security is raising the retirement age," he said.

Rademacher thinks that it's unlikely the U.S. will get to the point reached by France, where protests erupt over a reform of the pension system.

"I don't expect that it would be the same level of uprising that we've seen in France—that's a different cultural dimension, they're such different countries," she said. Americans are also much more supportive of positive changes to fix the Social Security crisis, Rademacher said.

"There is a sense that while people rely so heavily on Social Security as the foundation of financial security in retirement—and only half of Americans right now have their own savings outside of a social security system—at the same time there is this kind of sense of individual responsibility in America, where people want to be saving, they want to have their own ability to pair personal savings with a government sponsored account."

"There's a lot of energy and a lot of bipartisan support for making our retirement savings system, the private retirement savings system, more robust at the same time as we solve the Social Security reductions. So I am not completely pessimistic that we can get there."

Can the Worst-Case Scenario Be Avoided?

"There are many ways policymakers can avoid Social Security insolvency," Johnson said.

"One option is to inject new revenue into the system by extending Social Security's payroll tax to higher-earning workers. Social Security revenues come primarily from payroll taxes paid by workers and their employers on earnings up to a certain amount each year."

Another option would be to remove the artificial earnings cap—the move that Fiesta and his group back as their ideal solution to the expected Social Security crisis.

"Right now workers in the U.S. and their employers pay into Social Security up to $160,200—it's adjusted every year," he said.

"We feel that because of the skewing of incomes in the U.S. over the last 25 to 30 years, where more income is being concentrated in the higher five or six percent of Americans, having those who can afford it to pay more, which would be a fair solution, would help the fund as a whole and obviously retirees. Spain in March just did something similar to that with its social security system."

Something similar was suggested by Joe Biden during the 2020 presidential campaign, when the then-candidate proposed subjecting all earnings above $400,000 to the payroll tax. Under Biden's plan, high earners would not accrue future Social Security benefits on those contributions.

"If Biden's plan were in effect in 2023, a worker (and their employer) would pay payroll taxes on their earnings up until $160,200. They would not pay taxes on earnings between $160,201 and $400,000, but they would pay taxes on the amount in excess of $400,000," Johnson explained.

"Other options include raising the payroll tax ceiling to some other amount, say $200,000 or $400,000 (but not taxing earnings in excess of those amounts); raising the payroll tax rate, and subjecting other types of income to Social Security taxes (such as investment income). Others have called for reducing benefits, such as by cutting payments to high-income beneficiaries and raising the retirement age—something that has now happened in France," he added.

Fichtner said that lawmakers could indeed vote to solve the crisis with a tax increase, but added that this would also be an unpopular decision.

"If you were to raise taxes in 10 years just to cover that increase, then you would have to raise our payroll taxes—which right now mean that 12.4 percent of someone's paycheck goes for Social Security—that would go from 12.4 to at least like 16.5 percent. That's a four percentage point increase for a 33 percent tax increase. That would hit current workers today, and I don't think any Congress is going to put a 33 percent tax increase on current workers."

Most reform options, said Fichtner, would hit younger generations currently in work. "Today's generations will be forced to pay more for current retirees and near-retirees, and then get less when they retire themselves. And that's the big challenge."

"The future of social security is part of a broader conversation about the future of wealth," Rademacher said.