Ever since it was first created in 1935, Social Security has provided retirees with supplemental retirement income. Since the vast majority of us pay into the Social Security system, and we will one day reap our share of the program, we should pay careful attention to changes regarding the future of the system.
But of course, such a large government program is bound to include some confusing rules and procedures. Plus, we know that the future of Social Security is somewhat in jeopardy these days. As we look to the future, keep these seven facts in mind.
The Social Security trust funds will be exhausted around the year 2034. Taxes cover a majority of benefits paid out of the system. But Social Security also maintains two trust funds that help to cover the difference between incoming taxes and benefits paid. Unless we make changes soon, those trust funds could run out of money by about 2034.
The program already faces a deficit. Since 2010, benefits paid out have exceeded taxes coming into the Social Security system. This forces a budget shortfall for the Treasury Department each year.
Social Security will be able to pay out 79 percent of estimated benefits after 2034. If we did nothing at all, incoming taxes would pay for about 79 percent of scheduled benefits once the trust funds are exhausted.
Social Security makes up about a third of all retirement income. If you add together all income reported by retirees, Social Security represents about 34 percent.
The number of retired Americans is growing rapidly. In January 2017, there were about 48 million Americans who had reached age 65. In 2035 we expect to have about 79 million retirees in our society.
The birth rate is slowing. Baby Boomers leaving the workforce outnumber the young workers who replace them. That’s because people are having fewer babies, which means fewer young adults growing up, going to work, and paying taxes.
The number of taxpayers is dropping. How much does the lack of taxpayers affect Social Security? For every person drawing benefits, there are 2.8 workers paying taxes. That number is set to drop to 2.1 workers per beneficiary by 2035.
As you can see, the problems faced by the Social Security system are significant. However, policy makers are aware of the problems and are taking steps to correct them. Social Security is an important program that no one wants to see expire.
In the meantime, keep in mind that Social Security was never meant to be a primary source of retirement income. Keep planning for your own retirement savings, and give us a call so that we can help.