Social Security is a lifeline for many in retirement. In fact, around 1 in 5 adults age 50 and older say they have no other retirement income outside of their benefits, according to a 2023 survey from the Nationwide Retirement Institute.
However, the program has been facing some major challenges in recent years, and they could affect your monthly payments. Whether you're already retired or planning to retire soon, there are three Social Security problems that should be on your radar -- as well as what you can do to keep your retirement safe.
1. Its trust funds are running out
Social Security relies primarily on payroll taxes to fund benefits. Today's workers pay into the program through taxes, and that money is then paid out to current beneficiaries. In recent years, though, the program's income hasn't been enough to fully cover its expenses.
To cover the deficit, the Social Security Administration (SSA) has been taking money from its trust funds. This has helped avoid benefit cuts so far, but those trust funds won't last forever. The SSA Board of Trustees predicts the money will run out by around 2034, at which point taxes and other income sources will only be enough to cover around 80% of future benefits.
This means that unless lawmakers are able to come up with some sort of solution, benefits could be slashed by around 20% by 2034.
2. Potential solutions could cost retirees
The good news is that this issue is on lawmakers' radar, and there are several potential solutions on the table. The not-so-good news is that some of them could hurt your benefits.
The most popular (and the most effective) solution is to start taxing income over $400,000 per year. As of 2023, only income up to $160,200 per year is subject to Social Security taxes. By taxing higher-earning individuals more, that will increase the program's funding.
Other solutions, though, focus more on reducing Social Security's expenses, such as raising the full retirement age from 67 to 68 (or even up to 70). A higher full retirement age means older adults will need to wait longer to collect their full benefit amount, reducing the amount they'll receive over a lifetime.
Some lawmakers have also suggested reducing benefits for higher earners. It's unclear who might be affected by this proposal or how much benefits could be reduced, but this solution would reduce the amount Social Security has to pay out -- reserving more cash for lower-earning beneficiaries.
3. Benefits are losing buying power
Social Security is designed so that, in theory, it should keep up with inflation over time. Most years, beneficiaries will receive a cost-of-living adjustment (COLA) to do just that.
However, those COLAs haven't been enough to effectively keep up with inflation, and Social Security has lost around 40% of its buying power since 2000, according to research from The Senior Citizens League. This means that benefits don't go nearly as far as they used to, and it's getting harder and harder to survive on Social Security in retirement.
What you can do to prepare
How you'll prepare for these problems will depend on where you are in your retirement journey. If you're already retired, simply staying aware of how these issues might affect your future benefits may be the best thing you can do right now.
If you still have time to save, it could be wise to work on strengthening your retirement fund. The more you can rely on your personal savings, the less affected you'll be by potential benefit cuts or loss of buying power.
Finally, if you haven't started taking Social Security yet, you may consider delaying benefits. Waiting until age 70 to file will result in collecting your full benefit amount plus a bonus of between 24% and 32% per month for the rest of your life. If benefits don't go as far in the future, that extra money can be a game-changer.
Social Security is facing some big challenges, all of which are mostly out of your control. However, by taking steps to increase your benefit amount or reduce your dependence on your payments, you can ensure you're prepared for whatever may happen.