Question: R.A. in Ludlow: I’m 54. Should I be worried about Social Security going broke before I retire?
A: First, let’s set the record straight. Social Security cannot technically ever "go broke." As long as there are workers paying into the system, you’ll get something. It might not be the amount you’re expecting, but it will be something.
Now that’s not to say the program isn’t facing some serious funding issues, because it is. And the last few years haven’t helped. According to the Social Security Administration’s annual trustees’ report that was released last September, the trust fund currently used to pay beneficiaries may run out of money in just 12 years – 2034 – which is one year earlier than previous projections. Why? The report cited numerous factors, including high unemployment due to COVID-19 (fewer workers means fewer people paying into the system), increases in deaths, decreases in births, and lower immigration rates.
This all means that if no changes are made by 2034, you should expect to only receive about 78% of your benefit. However, we would like to think that our elected representatives will come together as they did in 1983 and make sufficient changes to keep the system solvent.
If you’re someone who’s planning to rely solely on Social Security payments for your retirement income, can you live off essentially three-fourths of what you’re expecting if the worst-case scenario plays out? That would probably be tough for most people. That’s why, ideally, Social Security should just be one of many retirement income streams at your disposal. So be sure you’re saving and investing on your own. That way, if you don’t get your full promised benefit, your retirement lifestyle and budget won’t be impacted too severely. If you do get your full promised benefit, it’s icing on the cake.
The Simply Money point is to remember that nothing is ever guaranteed, not even Social Security payments. Plan accordingly.