The Surprising Truth About the Future of Social Security

Social Security’s been a staple of seniors’ retirement plans for decades, but whether it’ll be around for decades to come is a more complicated issue. A lot of workers believe Social Security won’t be there for them when they’re ready to retire. This fear isn’t without basis but it’s also not completely accurate. 

Let’s look at why Social Security is in danger and what the future of the program could look like.

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Social Security is facing a funding crisis

People are worried about Social Security running out of money because its costs currently exceed its income, and that has forced the Social Security Administration to drain the program’s trust fund reserves. If nothing changes, the government will reach a point where it’s no longer able to pay out all scheduled benefits. The latest estimates place this point at about 2035, though it remains to be seen whether the substantial 2023 cost-of-living adjustment (COLA) moves this date up.

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But even if this happens, Social Security won’t end. It has other sources of income that will continue even after the trust funds are depleted. You’re probably familiar with the Social Security payroll taxes that all workers pay on the first $160,200 of their income in 2023. This automatically comes out of your paychecks, and it helps fund the benefits of seniors on Social Security today. 

Some seniors also pay federal (and possibly state) taxes on their Social Security benefits if their incomes are high enough. This money also helps fund the benefits of other recipients right now.

Neither of these sources of income is going away, so Social Security will still continue in some form for the foreseeable future. What’s less certain is what that future will look like.

What does the future hold for Social Security?

Beginning in 2035, Social Security will only be able to pay out about 80% of scheduled benefits, and this will drop to 74% by 2096, according to the latest Trustees Report. That means the government would eventually have to slash benefits by up to 26%. But the truth is, it might not come to that.

Politicians on both sides of the aisle recognize that Social Security’s funding crisis is serious and requires action. But so far, they haven’t been able to agree on how to increase the program’s revenue. Some suggested strategies include:

  • Raising the ceiling on income subject to Social Security payroll tax
  • Raising the Social Security payroll tax rate for all workers
  • Raising the full retirement age (FRA), which determines when a senior qualifies for their full benefit

It’s possible the government might try a combination of these strategies or it could come up with a different approach altogether. For now, the only thing to do is wait and watch.

That can be tough, especially for workers who are counting on their benefits to help fund their retirement. It’s best to prioritize saving for retirement on your own as much as possible. If necessary, you could delay retirement or transition to part-time work for a while before retiring completely.

You don’t need to plan for a future without Social Security because the program is going to continue in some fashion. But if you’re worried, you may want to plan for about 75% of the benefit you believe you’re entitled to just to be on the safe side.


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