Concerns that Social Security will run out of money are not uncommon among future retirees. In fact, many current workers harbor doubt they'll get back all the money they put into this retirement benefits program.
While there's some potential justification for worries about Social Security's financial stability, the reality is that things aren't nearly as bad as they seem. If you're concerned about Social Security running out of money, that fear is probably unfounded. Here's why.
Image source: Getty Images.
Social Security can't run out of money for one simple reason
Concerns about Social Security's future are largely based on worries that the program's trust fund will run dry. The trust fund is indeed expected to be depleted sometime in the 2030s (depending on which projections you look at). So, rumors about Social Security's financial trouble are not entirely baseless.
However, what many people do not understand is that Social Security doesn't just have money sitting in trust waiting to provide payments to retirees. It's also continually collecting money. In fact, every worker currently pays 6.2% of their income to Social Security up to a wage base limit of $160,200 (as of 2023). And their employers match this amount. So, for each person earning qualifying wages in the United States, 12.4% of their pay up to $160,200 is going directly to Social Security (income above the wage base limit isn't subject to Social Security tax).
Unsurprisingly, a substantial amount of taxes are collected from current workers. This money coming in would be enough to pay somewhere around three-quarters of the amount retirees have been promised.
That's a far cry from paying all retirement benefits and cuts of more than 20% would be undoubtedly painful. But as long as there's not a major change to the law and payroll taxes continue to serve as Social Security's funding stream, there is no risk that the retirement benefits program is going to run out of money entirely. As long as people keep working and paying taxes, there will be money available for retirement benefits to be paid out.
Does this mean your benefits are safe?
Knowing that Social Security will keep collecting revenue to pay out most of the promised benefits should come as a relief. But while you don't have to worry about getting nothing, you should be aware you may end up with less than expected.
Obviously, if the trust fund runs dry and Congress doesn't act, an automatic benefit cut of more than 20% would take effect. Unfortunately, that's not the only possible way Social Security could end up being less generous. Some proposals to fix the program's financial shortfalls could also cost you money, such as plans to increase the full retirement age so you have to wait longer until your standard benefits become available.
Ultimately, while you can count on Social Security to provide some income, the exact amount you will get is up in the air until Congress finds a way to shore up the program's finances. If you don't want to find yourself struggling due to a benefits reduction that could be inevitable, make sure you have plenty of savings to supplement whatever the government offers.
