Average Social Security Payment Could Reach $3,000 by 2040

The average monthly Social Security payment nationwide is $2,008. With an annual cost-of-living adjustment (COLA) of 2.8%, this payment will reach $3,038 in 2040. The 2.8% figure is the COLA going from this year into next.

It is no wonder the system could go broke in 2034. The average payment per month will reach $2,508 that year based on the same methodology.

The figures show the power of compounding, and the reason Social Security is in such trouble. Including the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds, Social Security has $2.7 trillion in the bank. It shrank to that number by falling 3.6% last year.

The primary drop in the total Social Security fund may actually accelerate because of the so-called Silver Tsunami. That is the nickname for the baby boomers who, as a group, are taking more from the fund almost every year as their ranks grow. And those boomers have a longer life expectancy than in the past.

Another reason for the decline is that fewer young people pay into the fund, as their numbers dwindle. In 1960, there were 5.1 working people to pay for each person on Social Security. That number is 2.7 people now, and projections have it dropping to 2.3 people in 2035.

It is very clear that Congress will have to increase the amount of the total fund. That increase will need to be into the hundreds of billions of dollars now, and perhaps as much as $1 trillion in 2034. Otherwise, Social Security monthly payments could drop by about 20% by 2040.

A drop in Social Security would have a devastating effect on the economy. Consumers over 67 years of age would lose much of their discretionary income, depending on whether they get money from other sources.

Social Security payments per month only reach $3,038 by 2040 if the system is fixed.

Some calculations were done with the help of Gemini.

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