Is Social Security Disappearing in 10 Years? Here’s the Truth

Given the number of Americans today who rely on Social Security to make ends meet in retirement, the idea of the program going away is pretty scary. Yet that’s something many people are convinced is happening.

But is Social Security really going to just disappear? Not at all. Here’s what’s really happening.

The clock is ticking down

There are a lot of mistruths circulating these days about Social Security, so it’s important to get to the bottom of what’s real versus fake news.

First, let’s get the fake stuff out of the way. Social Security is not on the verge of bankruptcy. And the reason is that the program is primarily funded by payroll taxes. So as long as there’s an active labor force, Social Security can continue to run.

The U.S. labor force, however, is shrinking as baby boomers retire in droves. Younger workers are coming in to replace them, but not quickly enough.

What this means is that in the coming years, Social Security’s financial resources will be significantly strained as the program not only loses out on crucial payroll tax revenue, but also has to pay benefits to the millions of seniors who start claiming them.

Social Security can tap its trust funds to keep up with its benefit obligations for a period of time. But according to the program’s Trustees, Social Security’s trust funds will be depleted in 2035 based on recent projections. What this means is that while Social Security is not going to disappear in 10 years, it may have to cut benefits at that point.

Benefit cuts aren’t a given, but they’re something to prepare for

If you’re a retiree who depends on Social Security to make ends meet, the idea of benefit cuts is probably pretty scary. And the same might hold true if you’re a current worker whose options for building retirement savings are limited, and you expect to be pretty dependent on Social Security once your career ends.

But one thing you should also know is that Social Security cuts are not set in stone. Lawmakers have different options for preventing them.

The problem, though, is that no solution for avoiding benefit cuts is optimal. And that’s something lawmakers will need to come to terms with.

Raising Social Security taxes, for example, could pump more money into the program. But that would leave workers even more tax-burdened than they are today.

Lawmakers can also push full retirement age back by a few years. But that effectively sentences millions of workers to more time in the labor force than they might feel they can manage.

As the clock ticks down toward Social Security’s insolvency date, there are apt to be a lot of rumors circulating about the program. But do try to get to the bottom of them so you’re not misled.

For now, that means gearing up for Social Security cuts, but not writing off those benefits completely in the context of your retirement. There’s simply no need to go to that extreme.