Social Security is in trouble. The program's Trust Funds are currently expected to run out of money in 2034, which would slash benefits by nearly a quarter. As if that weren't enough, the program's returns are failing to keep up with inflation, which could drain that money even faster. All that adds up to significant reason to worry about that critical program's mid- to long-term future.
Despite those very real worries, there are good reasons to believe the program can continue for the long haul. It will have to look different in the future than it does today, but it should still be able to provide something for retirees. For these three reasons, Social Security isn't as unreliable as you think.
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No. 1: Even if the trust funds empty, Social Security will still pay something
In addition to money from the trust funds, Social Security takes in tax revenue from most Americans with jobs and from retirees whose incomes are high enough to make their benefits taxable. Even if nothing else changes, the tax revenue Social Security gets is enough to pay a large chunk of the benefits it expects to pay. According to the program's 2021 Trustees Report, Social Security expects to be able to pay out around 78% of benefits once the trust funds empty, and around 74% over the long haul.
As a result, if your "normal" Social Security benefit is around $2,000 per month, you can still expect somewhere between $1,480 and $1,560 per month as the trust funds empty. That's a painful cut, but it's still the vast majority of the money you would have expected had the trust funds remained healthy.
No. 2: Lawmakers have patched Social Security in the past
Social Security has faced crises in the past. For instance, in its 1982 Trustees Report, Social Security indicated that "the OASI Trust Fund would be unable to pay the benefits falling due on July 1, 1983." By January 1983, the bipartisan Greenspan Commission had issued the report that Congress ultimately used to patch Social Security through to its current state.
If history is any guide, it might be 2033 or 2034 (or whenever the trust funds are truly on the brink of emptying) before Congress does anything about it, but chances are strong that it will be patched again. There are simply too many voters who depend on the program for elected officials to simply let it fail.
No. 3: Social Security remains a popular program
According to an AARP survey from 2020, 96% of Americans rated Social Security as an important program, and around 40% of Americans expect to rely on it for a substantial source of their incomes. That kind of support is what makes Social Security the so-called third rail of American politics. That, more than anything else, should provide you with some level of comfort that Social Security will continue well beyond the day its trust funds are projected to empty.
Almost ironically, the program's popularity provides a key reason it's so hard for lawmakers to patch it before it truly becomes a crisis. After all, any patch would involve some level of tax increases, benefit cuts, and/or changes to the program's investment strategy. Suggesting touches to any of those can readily make politicians easy prey for members of the opposite party.
Social Security was never intended to stand alone. Start preparing now.
Social Security itself acknowledges that at its best, the program offers retirees only around 40% of their pre-retirement income on average. As a result, people have their entire careers to plan to supplement any shortfall between what the program will provide and the retirement that they'd like to have. Even today, you have more than a decade until the program's trust funds are expected to empty. That's enough time to put a plan in place to help you supplement for the shortfall.
If you haven't put a plan in place yet, there's no better time than now to get started. After all, regardless of how Social Security gets patched, chances are that you will pay for that patch through a combination of higher taxes, lower benefits, and/or less certainty in those benefits. The better prepared the rest of your nest egg is before that patch happens, the easier it will be for you to handle that patch, no matter what form it takes when it comes.
So recognize that while Social Security will very likely be there when you need it, it may look quite different around a decade from now than it does today. Get started now, and you'll boost your chances of a comfortable retirement, no matter what the future may bring to Social Security.
