I’m a Retirement Planning Expert: Here’s Why I’m Confident About the Future of Social Security
If you collect Social Security benefits, you might worry that the checks will stop coming one day when the program collapses. If not, you’ve probably heard that you’re paying into a system that won’t exist when you’re old enough to cash in.
As they have throughout the program’s history, lawmakers will soon have to adjust Social Security to adapt to changing demographic and economic realities, but the sky — or safety net — isn’t falling.
A Vote To End the Program Is a Vote To End Your Political Career
Even in the most politically polarized era in modern American history, Social Security remains a rare island of agreement. When the program turned 85 in 2020, an AARP poll found that 96% of people, regardless of affiliation, support Social Security and consider it either the most important or one of the most important government programs.
Voters are quick to put politicians in check at even the slightest diversion from anything but unwavering support, as Florida Sen. Rick Scott learned the hard way when he proposed sunsetting all federal legislation, including Social Security and Medicare, at the start of 2023.
It’s Safe Because It’s Popular and It’s Popular Because It’s Successful
The nearly universal support the program enjoys and the pressure that popularity puts on elected representatives is enough to keep it safe — to threaten Social Security is to threaten the very survival of tens of millions of voters.
“I don’t believe that the Social Security program is in danger,” said Joe Wilson, a registered financial advisor and partner at Ten Point Financial. “Too many retirees depend on the payments to live on in their elder years. According to the SSA, 37% of men and 42% of women receive 50% or more of their income from Social Security, and 12% of men and 15% of women rely on Social Security for 90% or more of their income. Getting rid of this program will essentially put a large percentage of the elderly into poverty.”
According to the Center on Budget and Policy Priorities (CBPP), Social Security lifts more than 1 million children and four in 10 adults ages 65 and up from falling below the poverty line. Without it, America would go back to the pre-1935 time when a retirement plan was having enough children to float you when you get old.
“People would rather see the government take care of their parents than having to do so themselves,” said Wilson.
Insolvency Fears Are as Old as the Program, but They Never Come True
Social Security can survive another decade before the trusts that fund it are depleted in the early 2030s. When that happens, it will be left with only incoming payroll taxes, enough to fund just 76% of scheduled benefits.
That reality fuels a widespread but mistaken assumption that the program is on an unavoidable collision course with insolvency — but we’ve been here before.
According to the SSA, large percentages of the population have worried that Social Security wouldn’t be there when it was their turn to collect since at least the economic upheaval of the 1970s. The program has been threatened with several crises as bad or worse than the one it’s facing now, and Congress has always legislated its way out of trouble, albeit usually not until the last possible moment.
“Despite the noise we hear in the world about insolvency and shortfalls, Social Security isn’t going anywhere,” said Leah Woodly, associate financial advisor with Dorval & Chorne Financial Advisors. “As long as there are people working and paying Social Security taxes, there will be Social Security funds available to those who are receiving benefits. Social Security will likely look different in the years to come. However, the program itself will stand.”
Congress Won’t Have To Move Mountains To Fix It
Congress will soon have to revise the program to adapt, as it has several times in the past — but the system is hardly broken beyond repair. According to the CBPP, “Relatively modest changes would place Social Security on sound financial footing.”
“The easiest change would be to decrease the payouts,” said Wilson. “This would not be a popular change, but cutting benefits is one of the surest ways to ensure the longevity of the program.”
Another option is to raise the age of eligibility, which Congress has done before.
“The original age for full Social Security benefits was 65 in 1935 and now it is 67,” said Wilson. “Compare this to the data from the SSA that the life expectancy for a 65-year-old has increased from 14 years to 20 years between 1940 and 2023. Keeping the full benefits age on pace with life expectancy is a logical change.”
Congress could also raise or eliminate the income cap exemption.
“Currently any income over $160,200 is not subject to Social Security tax,” said Wilson. “Increasing that will affect a limited percentage of Americans, so it is likely to be popular among voters.”
Woodly also raised the possibility of “a reduction in the current 8% annual increase for those who delay claiming their Social Security benefit.”
The solution will likely include a combination of those possibilities, none of which are particularly earth-shattering or even unprecedented.
“Overall, my best guess is we see a collection of small changes to minimize the impact to any particular group,” said Wilson. “Social Security is a keystone for retirement and our society will ensure it continues, even if changes are needed.”
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