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How Safe Is My Social Security?

By Dan Caplinger – Updated Aug 28, 2018 at 9:00AM

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There's a lot of bad information about the retirement program. Get the facts here.

Social Security benefits are the primary source of retirement income for the majority of retired Americans. It's therefore not terribly surprising that many retirees and near-retirees are worried about whether their Social Security payments are safe, especially in light of numerous reports predicting an imminent financial crisis for the program within the next 15 years or so.

How safe Social Security is depends on exactly what you mean by safety. Although current participants in the program have nothing to worry about in terms of receiving their immediate benefits, the long-term challenges facing the system could result in changes that could force you to change your expectations for what Social Security will provide you in the decades to come.

Three Social Security cards with a brass key on top of them.

Image source: Getty Images.

Near-term safety for Social Security

In one sense, Social Security is one of the safest sources of income that retirees can have. The payments that Social Security makes are backed by the full faith and credit of the U.S. government, and Social Security payments are included in what federal budget policymakers consider to be mandatory government spending. This makes Social Security payments automatic even without an appropriations bill from Congress, and the only way that lawmakers can change the amounts expended on Social Security is to amend the Social Security Act itself. With further political checks including a supermajority requirement in the Senate in order to pass legislative amendments, it's difficult to make adverse changes to Social Security that would reduce its safety in the future.

Social Security benefits are even able to continue during government shutdowns. Even though some services from the Social Security Administration do stop during a shutdown, checks continue to go out to recipients.

Longer-term questions about Social Security

Looking further into the future, Social Security's safety seems less assured. According to the most recent report from the Social Security Trustees, the demographic bump of retiring baby boomers and their families will put an unprecedented burden on the Social Security system, causing the program to spend more than it takes in from payroll taxes. With about $2.9 trillion in its trust funds, Social Security should be able to make full benefit payments until 2034. Thereafter, though, the revenue the program collects from workers and other sources will be sufficient to pay only 75% to 80% of benefits.

The Trustees report lists a number of options that lawmakers have to remedy the situation. Raising payroll taxes could enable the program to keep paying all of its scheduled benefits indefinitely by putting more of a burden on workers. Immediate benefit cuts could lessen the pressure on Social Security's revenue sources, slowing the rate of decline for the program entirely but forcing current retirees to bear the brunt at a time when they're least able to adapt to reduced income.

The key thing to note is that Social Security benefits can change at any time if lawmakers pass a bill that's signed into law by the president. Court cases have held that there's no vested property interest in anticipated Social Security benefits. It's therefore theoretically possible that Congress could reduce or even eliminate Social Security payments in future legislation. In light of that fact, some believe that the best practice for people doing financial planning is simply to assume that Social Security won't be there at all to help you make ends meet in retirement.

Hope for the best, but plan for the worst

Social Security is in no immediate danger of not meeting all of its obligations, and even in the long run, the program will be able to afford to pay the majority of benefits under current law. Where the greatest uncertainty about Social Security lies is in what lawmakers might do to change the program, either to make it more financially viable in the long run or for other reasons. Given Washington's reputation for impulsive legislative moves that don't always work as well as hoped, it's smart to hedge your bets by having a plan in place just in case something happens to reduce your current or anticipated income from Social Security.

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