Nearly Half of Self-Employed Americans Fear Social Security Won't Be There for Their Retirement

For self-employed Americans, Social Security can feel like a complicated and unfair system. Unlike W-2 employees, they must cover both the employer and employee portions of Social Security taxes, often without clear guidance or financial advice. Many are unsure of their obligations, with some mistakenly believing they can opt out entirely. Others worry they will pay into a system that may not exist when they retire.

To better understand these concerns, we surveyed 1,006 self-employed Americans about their views on Social Security. The results highlight widespread frustration, financial uncertainty, and a desire for policy changes. From tax deductions to alternative retirement systems, self-employed workers are looking for solutions that better fit their needs.

Key takeaways

• 1 in 6 self-employed Americans incorrectly believe they can opt out of Social Security, and Gen Z (24%) is the most likely to think so.

• 64% feel that Social Security taxation is unfair for them compared to W-2 employees.

• 70% have never consulted a financial advisor about Social Security taxes.

• 45% fear Social Security won't exist when they retire, especially millennials (52%).

• Nearly 1 in 5 (17%) underreport their income to reduce their Social Security tax burden, with Gen Z (22%) being the most likely to do so.

• 42% would prefer to opt out of Social Security and invest privately, while 70% believe the government should provide special tax breaks to offset their Social Security burden.

Understanding Social Security taxes

Navigating Social Security taxes can be particularly challenging for self-employed workers, who bear a heavier financial burden than W-2 employees. Many lack professional guidance, leading to confusion, miscalculations, and even penalties.

More than half of self-employed workers (64%) believed that Social Security taxation was unfair to them compared to traditional employees who receive a W-2. Despite this, 70% had never consulted a financial advisor about their Social Security tax obligations for assistance.

This lack of guidance sometimes led to costly mistakes — nearly 1 in 10 self-employed workers had been penalized for miscalculating or missing Social Security tax payments. Baby boomers (13%) were the most likely to have faced penalties, followed by millennials (10%), Gen Z (7%), and Gen X (6%).

Many self-employed Americans misunderstood their Social Security tax obligations. Just over half (51%) knew they had to pay both employer and employee Social Security taxes. While 64% of baby boomers correctly understood this, only 42% of Gen Z did.

Misinformation was also common — 1 in 6 self-employed individuals wrongly believed they could opt out of Social Security altogether, with Gen Z (24%) being the most likely to hold this misconception. In reality, only those with net earnings under $400 annually are exempt from this self-employment tax.

Additionally, 37% mistakenly thought their annual income for Social Security benefits was calculated the same way as for W-2 employees. Self-employed individuals' benefits are actually based on net earnings after business deductions, which can lower their reported income. Nearly 1 in 10 (9%) also believed that unreported income wouldn't affect their Social Security benefits. However, since the benefits are calculated based on reported earnings, failing to report income can lead to lower benefit payments in retirement and penalties.

Beyond tax misconceptions, self-employed workers also had doubts about their future benefits. Only half believed they would receive the full Social Security benefits they're entitled to when they retire. This could be due to widespread concerns about the program's long-term stability and potential funding shortfalls. According to a 2024 report from the SSA, retirement benefits are only on track to stay fully funded through 2033, though Social Security disability benefits are fully funded through at least 2098.

Tax payment practices and pitfalls

Self-employed Americans approach Social Security taxes in different ways, from strategic planning to risky shortcuts. While some take advantage of deductions and long-term financial planning, others underreport income to lessen their tax burden.

Only 1 in 5 self-employed individuals considered potential Social Security benefits in their retirement planning. Baby boomers (56%) were the most proactive in doing so, while Gen X (25%), millennials (14%), and Gen Z (13%) were far less likely to factor Social Security into their future finances. However, many took steps to minimize their tax burden — 65% had used deductions, with baby boomers (72%) and Gen X (66%) leading the way.

Some self-employed workers also engaged in riskier tax practices. Nearly 1 in 5 (17%) admitted to underreporting income to reduce their Social Security tax payments, a trend most common among Gen Z (22%). While this approach may provide short-term relief, it can lead to penalties and reduced Social Security benefits later in life.

What self-employed Americans want

Many self-employed workers feel that Social Security does not serve them well and would prefer alternatives. From tax breaks to new retirement systems, they want solutions that better fit their financial realities.

Nearly half of self-employed workers (45%) believed that Social Security would not even exist by the time they retired. Millennials (52%) and Gen Z (49%) were the most concerned about this. Given these fears, 42% of workers said they would prefer to opt out of Social Security entirely and invest privately instead, with Gen Z (48%) being the most likely to support this idea.

Many also wanted structural changes to the system. A large majority (70%) believed the government should provide special tax breaks for self-employed workers to help offset Social Security costs. Additionally, 65% supported the creation of an alternative retirement system specifically designed for gig workers, reflecting a growing desire for more tailored financial solutions.

Social Security and the self-employed

Self-employed Americans face unique challenges with Social Security, from higher tax burdens to widespread confusion about their obligations. Many worry the system won't be there when they retire, while others seek alternatives like private investments or special tax breaks. Despite these concerns, most continue to contribute without a clear plan for how Social Security will fit into their future. Addressing these issues could help create a fairer and more sustainable system for self-employed workers.

Methodology

We surveyed 1,006 self-employed Americans to explore how they perceive and manage Social Security. The generation breakdown was as follows:

• Gen Z: 17%

• Millennials: 50%

• Gen X: 23%

• Baby boomers: 10%

The survey was conducted in February 2025.

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