What's Happening
22 minutes ago

Netflix NFL Games Show Off Super Bowl Contenders, MVP Frontrunner: Benzinga Poll Says 27% Watched

benzingabenzinga.com
42 minutes ago

SEALSQ Corp Shares Are Moving Higher After Hours: What's Going On?

benzingabenzinga.com
47 minutes ago

'Zelle Became A Gold Mine For Fraudsters': Consumer Financial Protection Bureau Lawsuit (UPDATED)

benzingabenzinga.com
56 minutes ago

Ethereum co-founder Vitalik Buterin ‘adopts’ viral pygmy hippo Moo Deng with $293,000 donation to Thai zoo

theblocktheblock.co
1 hour ago

Cannabis Use Among Teens Plummets To 30-Year Low, Study Finds

benzingabenzinga.com
1 hour ago

Why BigBear.ai Stock Is Skyrocketing Today

foolfool.com
1 hour ago

Super Saturday Foot Traffic Surges, Sales Hit $157 Million: Potential Winners Emerge

benzingabenzinga.com
1 hour ago

12 Communication Services Stocks Moving In Thursday's Pre-Market Session

benzingabenzinga.com
1 hour ago

12 Health Care Stocks Moving In Thursday's Pre-Market Session

benzingabenzinga.com
1 hour ago

12 Industrials Stocks Moving In Thursday's Pre-Market Session

benzingabenzinga.com
1 hour ago

12 Information Technology Stocks Moving In Thursday's Pre-Market Session

benzingabenzinga.com
1 hour ago

Why C3.ai Stock Is Gaining Today

foolfool.com
2 hours ago

This Is What Whales Are Betting On Trump Media & Technology

benzingabenzinga.com
2 hours ago

Check Out What Whales Are Doing With POET

benzingabenzinga.com
2 hours ago

Microsoft's Options Frenzy: What You Need to Know

benzingabenzinga.com
2 hours ago

Freeport-McMoRan Unusual Options Activity For December 26

benzingabenzinga.com
2 hours ago

What the Options Market Tells Us About CME Gr

benzingabenzinga.com
2 hours ago

What the Options Market Tells Us About Chevron

benzingabenzinga.com
2 hours ago

Dreaming Of Moving Into A Newly Constructed Apartment? Redfin Reports The Shocking Premium For That Privilege As Rents Soar

benzingabenzinga.com
2 hours ago

Palladyne AI Shares Are Surging Today: What you Need To know

benzingabenzinga.com

What Will Happen to Your Benefits if Social Security Runs Out? And Should You Be Worried?

If you’re worried about the future of Social Security, you’re not alone.

A 2024 Gallup poll found that 87% of U.S. adults are concerned about the program, with 43% of that group admitting they worry a “great deal” about it. Also, 47% of nonretired adults believe that Social Security won’t be able to pay them a benefit once they retire.

Social Security has indeed been on shaky ground for years, and the problem isn’t going away. But what will that mean for your future benefits? And just how worried should you be for your financial future? Here’s everything you need to know.

Is Social Security running out of money?

Social Security’s situation is complicated. While the program is experiencing a cash shortfall, the good news is that it’s not running out of money completely.

Benefits are funded primarily through payroll taxes, and the money that workers pay into the system is immediately paid out to current beneficiaries. In other words, you’re not paying into an individual account that you’ll collect benefits from once you retire. When today’s workers retire, future generations will be funding their benefits.

Stack of Social Security cards.

Image source: Getty Images.

As long as workers continue paying payroll taxes, there will be at least some money to pay out in benefits. However, the program’s income sources haven’t been enough to fully fund benefits in recent years, leading to a deficit.

To bridge the gap between what the program is receiving in income and how much it needs to pay out in benefits, the Social Security Administration (SSA) has been pulling money from its trust funds: the Old-Age and Survivors (OASI) fund and the Disability Insurance (DI) fund.

The OASI fund is responsible for retirement benefits, while the DI fund covers disability benefits. At the current rate that the SSA is withdrawing, both trust funds are expected to run out by 2035, according to the SSA Board of Trustees’ latest projections.

When the trust funds run out, Social Security’s remaining income sources will only be enough to cover around 83% of future benefits, according to the report. In other words, beneficiaries could see their checks reduced by around 17%, assuming lawmakers don’t find a solution before 2035.

Potential solutions to strengthen Social Security

While Congress hasn’t agreed on anything yet, there are several potential solutions that could either increase Social Security’s income or reduce its expenditures. One of those solutions, for example, is raising the full retirement age from 67 to 68 or beyond. This means older adults would need to wait longer to collect their full benefit amount, reducing their lifetime benefit and saving Social Security money.

Some lawmakers have also proposed reducing benefits for higher earners, or perhaps raising the payroll tax itself. The most popular solution, though, is to tax income higher than $400,000 per year for Social Security purposes.

Only income up to $168,600 per year is subject to Social Security tax, as of 2024, and taxing income above $400,000 per year would dramatically increase the program’s funding. Around 81% of both Democrats and Republicans support this solution, according to a 2022 report from the University of Maryland.

However, even this solution would only eliminate around 61% of Social Security’s cash shortfall, according to the report. Raising the full retirement age would eliminate 14% of the shortfall, while reducing benefits for high earnings and raising the payroll tax would reduce it by 11% and 16%, respectively. It’s likely, then, that lawmakers may need to implement multiple solutions to fully solve the problem.

Should you be worried about your benefits?

Social Security’s problem is serious, but it’s not necessarily as dire as many people believe. Benefits will not be going away even if the trust funds are depleted, but your payments could be slashed quite substantially.

For those relying heavily on Social Security in retirement, it’s wise to come up with some sort of backup plan before 2035. Even if lawmakers find a solution before then, some of those proposals could still potentially reduce your payments.

If you’re still working and haven’t claimed benefits yet, boosting your savings or delaying claiming could help protect your finances going forward. Delaying filing for Social Security can boost your payments by hundreds of dollars per month, which can go a long way if cuts are on the horizon.

Social Security isn’t going bankrupt, but the program is still facing challenges. By staying aware of the situation and taking steps to prepare now, you can better protect your retirement no matter what the future holds.

The $22,924 Social Security bonus most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.

View the “Social Security secrets” »

The Motley Fool has a disclosure policy.

Related Posts

Many people find retirement to be a beautiful time. After years of working and sacrificing, it’s a moment finally to enjoy the fruits of your

Required minimum distributions (RMDs) are mandatory annual withdrawals the government makes you take from most retirement accounts beginning the year you turn 73. If you

Got a 401(k)? This employer-sponsored retirement account makes it easy to make pre-tax contributions straight from your paycheck. Your contributions lower your taxable income in

You’ve decided that 2025 is the year you’re finally going to claim Social Security. Perhaps it’s the year you’re retiring as well. It’s an exciting