Social Security is facing an uncertain future, but it might not be as bad as you think.
Social Security is supposed to provide some stability in retirement. It’s a regular monthly check that lasts as long as you live — or is it?
Ask many workers today, and they’re not sure whether they’ll get any money from the program in retirement. While these worries aren’t baseless, Social Security will continue to exist in some capacity, whether you retire in 2026 or 2076.
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Why is Social Security running out of money?
Social Security has been spending more than it’s taken in since 2021, largely because of changing demographics. When baby boomers were younger, the ratio of workers to retirees was very different from what it is today. Now, we have a much larger group of Social Security beneficiaries being supported by younger, smaller generations of workers.
The result is that Social Security payroll taxes and benefit taxes aren’t enough to cover all the program’s expenses. Right now, Social Security also earns some interest on money in its trust funds, but those trust funds are running out. When they do, the program will no longer be able to pay out all scheduled benefits.
However, this isn’t the same as Social Security disappearing. The latest Trustees Report indicated that Social Security’s trust funds will be depleted in 2033, but after that, it would be able to pay out about 77% of scheduled benefits.
What does this mean for you?
The good news is, you’ll get some money from Social Security, no matter when you plan to retire. The bad news is, no one knows what Social Security benefits will look like over the long term. Benefit cuts of roughly 23% remain a possibility. However, it’s also possible that the government will make changes to Social Security before that’s necessary.
To ensure the program can pay out all scheduled benefits, the government would have to increase funding, which means increasing taxes. While some proposals have focused on raising the taxable wage base, which would force wealthy Americans to pay more in Social Security payroll taxes, that alone wouldn’t be enough. Ordinary Americans will likely shoulder some of the cost. This could, in turn, make it more difficult for younger workers to save for retirement.
Right now, all you can do is focus on what’s within your control. Do your best to save as much as you can for retirement each month. Then, once the government decides what it wants to do about Social Security, it’ll be time to step back and reevaluate your retirement savings strategy.