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Will Social Security run out?

Running out of money

You may have heard that the Social Security program is running out of money. This is technically true, but only part of the story. Social Security is both paying out money to retirees and also collecting money from workers at the same time. Over its 80-year history, the program has collected more money than it has paid out. The current surplus is $3 trillion. However, in recent years the program is paying out more than it is collecting, and so the fund is shrinking. Current estimates are that the fund will run out in 2034.

What happens next

Once the surplus runs out, the program will still be collecting money, and those collections will cover all but 26% of the current payments. So, if nothing changes by 2034, the calculated benefit may be be reduced by 26%, but the payments will still continue. This is probably the 'worst case' scenario.

More information: The Future Financial Status of the Social Security Program

There are multiple mechanisms by which Congress could conceivably 'fix' the Social Security deficit, which would have less of an impact than the 'worst case' scenario. What will ultimately happen is unknown. Some of the ideas that have been proposed include:

  • Increase the payroll tax which funds the program.
  • Raise the ages at which benefits begin.
  • Change the method by which inflation adjustments are made to a more slowly rising value.
  • Change the bend points or ratios for the curve of annual indexed earnings.
  • Reduce the number of years from which benefits are calculated.
  • Reduce the spousal benefit.
  • Invest a percentage of the fund in equities.

What approach will be taken is unknown. It is up to Congress to decide how to address the issue. It is likely that some combination of the above will be used. It is also unlikely that the program will go away entirely, due to it's popularity.