If you’re worried about the future of Social Security, you’re not alone—many Americans share that concern. In fact, a 2024 Gallup poll revealed that 87% of U.S. adults are concerned about the program’s stability, with 43% admitting they worry a great deal about it. Nearly half of nonretired adults fear that Social Security won’t be able to pay them a benefit once they retire.
While Social Security has been facing challenges for years, it’s not all bad news. Let’s break down what’s happening with the program and what it could mean for your future benefits.
Is Social Security Running Out of Money?
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The situation with Social Security is complex. Although the program is facing a cash shortfall, it’s not completely running out of money.
Social Security is primarily funded by payroll taxes, which means that the money workers pay into the system now is used to pay current beneficiaries.
In other words, you’re not contributing to an individual account that you’ll collect from once you retire—future generations of workers will fund your benefits.
As long as workers continue paying into the system, there will still be money to pay out benefits. However, in recent years, income from payroll taxes hasn’t been enough to fully cover the amount needed, which has led to a deficit.
To make up for this gap, the Social Security Administration (SSA) has been pulling from its trust funds—the Old-Age and Survivors Insurance (OASI) fund for retirement benefits and the Disability Insurance (DI) fund for disability benefits.
According to the latest projections from the SSA, both of these trust funds are expected to run out by 2035. When that happens, the remaining income will only cover around 83% of benefits, which could result in a 17% reduction in Social Security payments unless Congress finds a solution.
Possible Solutions to Strengthen Social Security
There are several ideas on the table to address Social Security’s funding issues. While no decisions have been made yet, some proposed solutions include:
- Raising the full retirement age: One suggestion is to increase the full retirement age from 67 to 68 or higher. This would mean people have to wait longer to claim their full benefits, reducing the overall payouts and helping save the program money.
- Reducing benefits for higher earners: Another idea is to cut benefits for wealthier individuals, which would help reduce the program’s expenses.
- Increasing the payroll tax cap: Currently, only income up to $168,600 is subject to Social Security taxes, but some lawmakers have proposed taxing income over $400,000. This change could significantly boost Social Security’s funding, with broad support from both Democrats and Republicans.
None of these options alone would fully solve the issue. For example, raising the payroll tax cap could cover about 61% of the shortfall, while raising the retirement age would cover around 14%. A combination of changes will likely be necessary to secure the future of Social Security.
Should You Be Worried About Your Benefits?
While Social Security is facing real challenges, it’s not going away. Even if the trust funds run out, there will still be money to pay benefits, although those payments could be reduced. For anyone who relies heavily on Social Security, it’s a good idea to start planning for possible cuts before 2035.
If you’re still working, one way to protect your future is by boosting your retirement savings now. You might also consider delaying when you claim Social Security, as waiting longer can significantly increase your monthly payments. Taking these steps can help safeguard your financial security, no matter what happens with Social Security down the road.
Preparing for the Future
Though Social Security isn’t going bankrupt, it’s clear that changes are coming. Staying informed about potential adjustments and making plans to protect your retirement income can help you navigate whatever the future holds. By planning ahead, you can enjoy greater peace of mind in retirement.
For more tips on maximizing your Social Security benefits, make sure to stay updated on potential strategies that can help you boost your income and make the most of your retirement.