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.

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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.

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