3 Surprising Facts About the Future of Social Security

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For millions of retirees, Social Security is a lifeline. According to a recent survey by The Motley Fool, more than 70% of retirees say they are highly dependent on Social Security benefits. Of that group, 40% say they fully rely on the benefit.

But there are big changes on the horizon for Social Security — some good, some not so good. Here are three things to expect in the coming years.

Image source: Getty Images.

1. Benefit cuts may be imminent

The Social Security Administration (SSA) is currently experiencing a cash deficit. The program’s expenses exceed its revenues, meaning it pays out more money in benefits than it receives in taxes.

To cover the shortfall, the SSA dipped into its two trust funds. This allowed the program to continue to pay out full benefits despite the cash shortage.

The problem, however, is that those trust funds are expected to run out by 2035, according to the latest estimates from the SSA Board of Trustees. Once that happens, taxes and other revenue sources will only be enough to cover about 80% of expected benefits, meaning a 20% cut in benefits is in the offing.

2. However, Social Security will not go bankrupt

The good news is that this problem is not as serious as some people think. According to a 2022 report from the Transamerica Center for Retirement Studies, about 70% of workers believe Social Security won’t be there for them when they retire. However, despite the cash shortage, Social Security does not go bankrupt or disappear completely.

The program relies primarily on payroll taxes to fund benefits. Employees pay into the program through taxes, and that money is paid out to retirees. When today’s workers retire, younger workers will pay their benefits through taxes.

Even once the trust funds are depleted, there will at least be some money to pay in distributions. In other words, as long as workers continue to pay taxes, Social Security will not disappear completely.

3. Major changes may be ahead

The best-case scenario is that Washington finds a solution to the Social Security cash deficit before 2035, avoiding cuts altogether. But lawmakers are divided on possible solutions. Some of the most popular options are:

  • Raising taxes for wealthy workers: Currently, only income up to $147,000 per year is subject to Social Security taxes. But some lawmakers have proposed taxing any income over $400,000 a year as well. This would increase the amount of money flowing into the program, allowing the SSA to pay out more in benefits.
  • Increase in payroll tax: This proposal will increase wage tax. This would affect all employees subject to payroll taxes, regardless of their income, and would increase Social Security funding.
  • Increase the full retirement age: At present, the full retirement age for all adults is between 66 and 67. But some lawmakers have proposed raising that age from 68 to 70. Under this proposal, workers would have to wait longer to receive their full benefits, lowering their lifetime benefits — and reducing the program’s spending.
  • Reduce benefits for higher incomes: Some lawmakers have also proposed cutting benefits for the top 20% of earners, which would also reduce Social Security spending. These higher earners would still receive more than the average retiree, but not as much as usual.

Nothing is set in stone yet, as Congress has not agreed on any of these possible solutions. But as we get closer to 2035, Washington will feel more pressure to do something before retirees face budget cuts.

Major changes may be in store for Social Security, but we won’t know exactly what to expect until Congress comes to an agreement. By staying on top of these changes, you can ensure that you are as prepared as possible for whatever may happen.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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