You hear it mentioned on the news and in various political debated from time to time: Social Security is slowly running out of money. But, is that actually true? And, if so, what does that mean for those who are collecting payments? This can be a very confusing situation, but hopefully we can help to shed a little light on the subject.
Will Social Security Actually Run Out?
Believe it or not, this is not an easy question to answer. This is because of the way Social Security is funded. The SSA gets most of its money through taxes that are levied on workers’ incomes. The system was originally set up so that the amount of money coming in would be more or less equal to the amount of money going out. In short, the taxes of the current workers are used to pay for the benefits of those who have retired.
In theory, this is still how SS is paid. However, with expansions such as disability being added to the original program over the years, the money coming in doesn’t actually cover everything that is paid out. For a while, this wasn’t a problem because certain adjustments made to payrolls and taxes allowed SS to bring in more than was needed, and that surplus money was put into a special fund. Now, however, that fund is slowly dwindling, as more money is being paid out than is brought in. By current estimates, this surplus could end by as soon as 2034. So, in that sense, yes: Social Security is running out.
What Happens If It Does?
However, because of the way the system was designed, Social Security running out of its surplus doesn’t mean the end of the program, because the taxes coming in from current workers are still funding today’s retirees. It’s estimated that, under current conditions, Social Security would still be able to supply about 79% of its current beneficiaries.
But, what about the rest? Well, this is where programs like disability might face a problem. Because Social Security does fund things besides retirements, there are no real solutions yet on the table as to how to fix this. Suggestions have been floated that include everything from upping payroll taxes, decreasing everyone’s benefits, or supplementing the money with funds from other branches of government. In short, though, no one knows exactly what will happen. The fact that they have 17 years to figure it out should be comforting, but knowing how government works doesn’t exactly fill everyone with confidence when it comes to this issue.
If you’re uncertain about what this may mean for you moving forward, or would like to speak to someone about this issue, please don’t hesitate to contact us today.