Posted May 9, 2024 by Ben Carlson

A scholar asks:

I saw nan study this week that said Social Security will beryllium insolvent by 2035. As a paper carrying millennial (I’m 35) I’m operating nether nan presumption that Social Security won’t beryllium location for maine erstwhile I retire. Is that a adjacent presumption considering nan trillions of dollars we’ve added successful authorities indebtedness since nan pandemic?

I saw each of nan headlines too:

It sounds dire.

I cognize a batch of young group who consciousness nan aforesaid way. There is excessively overmuch authorities debt. Politicians won’t do thing to hole nan entitlement shortfalls. The boomers are going to time off nan cupboards bare.

Insolvency sounds scary but nan business is not rather arsenic grim arsenic nan headlines would person you believe. I went done the existent report. Here’s what I found:

If Congress does not enactment by 2035, nan spot money reserves are projected to beryllium depleted. However, nan income from Social Security taxes would screen 83% of scheduled benefits.

While it is existent that much money will beryllium going retired than coming in, nan shortfall is only 17 cents connected nan dollar. So it’s not for illustration location will beryllium nary sum astatine all.

Now look astatine nan floor plan they produced that takes things retired moreover further:

By nan twelvemonth 2098, erstwhile I will beryllium turning 117, they task nan taxation gross will screen 73% of nan benefits. That’s a agelong runway to statement things up.

There are 3 imaginable scenarios erstwhile reasoning astir these numbers:

(1) People should get utilized to nan thought of their Social Security benefits getting slashed starting successful nan 2030s.

(2) Politicians still person clip to enactment but taxes mightiness beryllium going up to debar immoderate shortfall.

(3) The U.S. authorities likes to walk money, we people our ain rate and we will simply spell into much indebtedness to screen nan shortfall.

If I had to guess, I would presume immoderate operation of (2) and (3) makes sense. No leader successful their correct mind would slash Social Security benefits for retirees. You don’t triumph votes that way.

They could raise nan taxation limits for high-income earners aliases summation nan filing property for younger people. Those fixes make consciousness to me.

Who americium I kidding? We’ll astir apt conscionable footwear nan tin down nan roadworthy and summation authorities indebtedness (or alteration spending elsewhere). One of nan lessons from Covid is if location is simply a governmental will for much spending, it will happen. The only constraint you person erstwhile you people your ain rate is inflation.

There are nary guarantees erstwhile it comes to nan actions of politicians, but Social Security is nan astir important status plan ever enacted successful America.

According to nan Center connected Budget and Policy Priorities, astir 23 cardinal adults and children would autumn beneath nan poorness statement successful nan U.S. without Social Security. That includes astir 17 cardinal group 65 aliases older and almost 1 cardinal children.

Without Social Security, 4 retired of each 10 elder citizens would beryllium successful a life of poverty:

Instead, nan existent number is 1 retired of 10.

Social Security besides provides a ample root of income for galore retirees. One study looked astatine Social Security arsenic a proportionality of family income for those 65 and older:

Nearly half of elder citizens person 50% aliases much of their income from Social Security. One successful 5 group 65 aliases older gets 90% of their income from nan program.

To immoderate people, Social Security is simply a supplement to different sources of income. To others, it’s 1 of their main sources of income.

Social Security is not bankrupt. Things will beryllium good arsenic agelong arsenic group support paying Social Security taxes. The authorities will fig thing retired aliases prioritize this plan.

If they don’t, a batch of group will struggle to spend their status years.

We covered this mobility connected nan latest section of Ask nan Compound:

Your favourite taxation master Bill Sweet joined maine connected nan show again this week to talk questions astir downshifting your consequence arsenic you attack retirement, nan astir tax-efficient measurement to salary for a aesculapian procedure, erstwhile DIY investors should see an advisor, nan Rule of 55 and really to hole for taxes successful retirement.

Further Reading:
Can Young People Still Count connected Social Security?