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 are projected to be exhausted around 2032–2034. Taxes cover a majority of benefits paid out of the system. But Social Security also maintains trust funds that help to cover the difference between incoming taxes and benefits paid. Unless changes are made, the retirement trust fund is projected to run out of reserves around 2032, with the combined trust funds (including disability) projected to last until roughly 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 is projected to be able to pay out about 78 percent of scheduled benefits after the trust funds are exhausted. If no changes are made, incoming payroll taxes would still cover roughly 78 percent of scheduled benefits.
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. As of recent SSA data, tens of millions of Americans have reached age 65, and that number continues to climb as the baby boomer generation ages — with the trend expected to continue well into the 2030s.
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? The ratio of workers paying into the system to beneficiaries drawing from it continues to shrink as the population ages, which is a central driver of the program’s long-term funding pressure.
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.
If you found this helpful, be sure to also check out the following pages:
Social Security Planning – Our Complete Guide
How a Social Security Advisor Can Help You