The Future of Social Security
Whether you are early in your saving journey or on the cusp of retirement, the future of social security has been a topic of conversation. For those that are unaware, Social Security and the Old-Age Survivor and Disability (OASDI) trust fund it is supported by, is projected to be depleted between 2033 and 2035. Social Security has been around for over 90 years, so why is it running out now?
Due to the Baby Bomer generation reaching retirement age, we have had an aging population and a shrinking tax paying workforce to fund programs like Social Security. Once program costs exceeded the revenues, we began relying on the aforementioned trust fund. Without action from Congress to address these shortfalls, there may be changes to the Social Security future you may be expecting. So, what’s true and what is a myth about these potential changes?
A common misconception that has taken over mainstream media is the idea that Social Security is completely going away. To debunk this theory, we have to talk about how Social Security is funded. As you can see in the chart:
- A majority (81% in 2034) of Social Security is supported by ongoing payroll tax funding, otherwise known as FICA. Regardless of how Congress rules, people will continue to work and pay these FICA taxes, and that portion of Social Security is here to stay.
- The orange section (19% in 2034) represents a portion of Social Security that will go unfunded if Congress does not act. So, while there are some concerns about Social Security solvency, we are facing more of a potential benefit reduction as opposed to a benefit elimination.
The other myth regarding the future of social security is how it should impact your timeline to collect benefits. Like how we discuss market volatility, it is tempting to react to current market conditions or potential legislative action. But in the long run, these impulse decisions may actually end up hurting your returns, as opposed to helping them. By claiming Social Security benefits earlier than Full Retirement Age, you reduce the already smaller benefit base which we want to avoid unless necessary. The current state of legislation is one to be monitored, but there is no need to rush and claim your benefits!
As always, if you have any questions about your specific retirement situation or would like to hear more about Social Security solvency, please feel free to reach out. We are here to help!
JP Morgan 2026 Guide to Retirement
Investment Advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Investment Advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice. are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice.
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