Friday Finance: The Death of Social Security?
“Experts say …” is the opening line of nearly every headline about Social Security. And the latest statement that experts espouse is that the funds in the Social Security pool will dry up by 2034 (that is 8 years ahead from today – 2026). Are they really experts? What are the challenges to the resuscitation of Social Security? And please state in plain English the ways to amend the entitlement to restore its solvency! Let’s start by demanding financial literate politicians pick up the task and make changes now!!
Lately some prognosticators have been shouting that the death of Social Security is premature. They claim that the program is not dying, but it is simply facing a funding shortfall. According to the 2026 Social Security Trustees Report, the combined trust funds are projected to be depleted in 2034. Without congressional action by that time, incoming payroll taxes would still be able to cover about 83% of promised benefits.
How did we get here? The Social Security safety net is currently paying out more than it takes in because the massive Baby Boomer generation (those born from 1946 – 1964) is retiring at a rate of 10,000 a day. And there are fewer workers paying into the system for every retiree.
The Funds Depletion Timeline
- Retirement Fund (OASI): Which translates as Old-Age and Survivors Insurance, the funds are projected to be depleted in 2032, at which point it could pay out about 78% of scheduled benefits, which means that every recipient would get their checks with a 22% haircut to future payouts.
- SS Disability Fund (DI): Which translates as Social Security Disability Insurance, the funds are projected to remain fully funded throughout the 75-year projection period.
- Combined Funds: If Congress passes legislation to merge the OASI and SSDI trust funds, full benefits can be paid until 2034.
How Could It Be Fixed?
If the goal is to prevent the cuts to future benefits, Congress has several options at their disposal. All four of these fixes can be effective. And any remedy will likely involve a mix of the following strategies:
- Raising the Cap: Increasing or eliminating the cap on wages subject to Social Security payroll taxes (currently, only the first $168,600 of earnings is taxed as of 2024).
- Increasing the Tax Rate: Slightly raising the current 6.2% payroll tax rate for both employees and employers.
- Adjusting the Retirement Age: Slowly raising the Full Retirement Age (currently 67 for those born in 1960 or later) to account for longer lifespans.
- Changing the Formula: Altering how the initial benefit calculations or Cost-of-Living Adjustments (COLA) are calculated.
Historically, Congress has stepped in to adjust the program’s finances before a major crisis, and lawmakers are expected to negotiate a legislative fix before the 2034 deadline to ensure full benefits continue to be paid.
If you are currently planning for retirement and want to understand how your potential payouts might be affected, here are some steps that can help you:
- Estimate your current Social Security benefits using official SSA calculators
- Compare how delaying your claim to age 70 affects your monthly payout
- Review your estimated taxable income in retirement with an accountant to see if you have what you need to sustain your lifestyle during retirement.
Henry E. Hooper 