Can you count on receiving Social Security benefits as a retiree? Many Americans don't believe they'll see any income from this entitlement program in their lifetime.
The reality, however, is that while there are plenty of reasons you should be skeptical about Social Security's role in providing retirement security, there's also one huge reason why it's almost inconceivable you won't get benefits.
Here's what you need to know.
3 reasons you shouldn't count on Social Security
Here are three big reasons why you can't necessarily count on Social Security to provide the income you're hoping for in retirement.
1. Social Security's trust fund is facing shortfalls
Social Security pays benefits out of its trust fund. Unfortunately, that trust fund is expected to run dry in 2034.
To be clear, the trust fund running dry does not mean Social Security won't have any more money. The program is constantly collecting revenue from current workers as they pay payroll taxes. The money Social Security is bringing in can still be used to pay benefits even if the trust fund balance hits $0.
You won't get your full promised benefit, though, if the trust fund runs out. There could be an automatic 22% cut if that happens. So, unless something changes, you may get less money than anticipated.
2. Lawmakers could change the rules any time
Social Security was created by the government, and it can be modified by lawmakers. In fact, some type of Social Security reform will need to be passed to prevent that automatic benefits cut from going into effect.
Lawmakers could shore up Social Security by raising taxes. But there are problems with this approach. Right now, benefits are based on taxes paid in so Social Security is an earned benefit. This is part of its broad appeal. If lawmakers increase taxes without a corresponding increase in benefits, this could erode the program's extreme popularity and put it at risk.
Other approaches to shoring up the trust fund could be necessary -- either in conjunction with a tax increase or as stand-alone solutions. This could include reducing Social Security's periodic raises or lead to lawmakers pushing back the age when retirees become entitled to full benefits.
If you get less money from Social Security than anticipated or you have to wait longer to claim your checks, this could derail your retirement plans if you're counting on these benefits.
3. Benefits are losing buying power
Social Security's current system for providing cost of living adjustments isn't a very good one.
Periodic raises that are supposed to help benefits maintain their buying power are determined based on whether a consumer price index called CPI-W shows costs are going up. CPI-W is a price index based around the spending habits of urban wage earners and clerical workers.
Retirees don't tend to have spending habits that mirror these workers, instead spending a greater percentage of their income on medical care and housing costs rather than things like entertainment. The result is that cost of living adjustments have fallen short of actually protecting seniors against the affects of inflation, and benefits have lost 30% of their value over two decades.
If your benefits are worth less in real terms because they don't buy you as much, you will struggle as a retiree if you're counting on them as a primary income source.
1 reason you should count on Social Security
While you clearly can't count on getting the full amount of promised benefits, there's one big reason why you absolutely will get some Social Security income. These retirement benefits are enormously popular and have kept millions upon millions of seniors out of poverty.
Any past attempts to cut Social Security or make major changes to it have been met with strong public anger, leading politicians to call the entitlement program the third rail of politics. Since lawmakers want to protect their political futures, they're going to make sure seniors -- including you -- keep getting Social Security checks.