Will Social Security be around when I retire?

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Will Social Security be around when I retire?
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Social Security has sustained generations of Americans and kept them out of poverty as they aged. But will Social Security benefits be there when you need them?

RELATED: Here’s how much of your monthly expenses Social Security will cover in all 50 states

Here’s the likely future of Social Security benefits…

Most of us are aware of the problems Social Security is facing. You pay into the system all your working life through payroll taxes, but with an aging population and fewer workers to support them, the future of this social safety net program isn’t exactly crystal clear.

By the latest math, Social Security will now be insolvent by 2035 — one year later than previously expected.

“There’s no need to panic about Social Security coming up short of money in 2035 because it’s not like Social Security will go from paying what it pays out to zero,” money expert Clark Howard says.

“It means in the future, the program will have to trim its benefit some or increase taxes some in order to continue to pay the benefit people have expected.”

Understanding the math behind Social Security benefits

A recent fact sheet from the Social Security Administration notes that there are 2.8 active workers for every one Social Security beneficiary today. By 2035, that number will drop to 2.2 workers.

It doesn’t take a math whiz to understand the numbers just can’t work if something doesn’t change. So how do you keep the promise of Social Security with that unfavorable math?

Well, the first thing to understand is that payroll taxes aren’t the only source of revenue for the SSA. There are two other sources.

First you have the Social Security’s Old-Age, Survivors, and Disability Insurance Trust Fund. The SSA dips into this trust fund when the outgoing benefits it pays each month exceed the revenue it takes in, which, incidentally happened in 2010 for the first time.

The other source of revenue is the income taxes that select Social Security recipients pay on their benefits.

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Last year, the SSA’s Office of the Chief Actuary estimated that the Trust Fund will be depleted between 2033 and 2034. Now that estimate has been pushed back by one year to 2035.

So does that mean Social Security benefits will be going away in 2035? Not exactly.

If nothing is done before then, you can expect to get 77 cents back out of every dollar you paid into Social Security beginning sometime around 2035.

Final thought

Therein lies the rub — if nothing is done before then. The reality is that something’s got to give. Clark Howard has long been saying that we’ve got some tough choices to make as a nation.

“Either taxes will have to go higher to maintain the current level of benefits or the benefits are going to have be reduced or some combo of the two,” Clark notes. “There is no magic rabbit to pull out of a hat, no matter what the politicians like to say about government waste and inefficiency.”

According to Clark, the real issue is that too many people depend on Social Security for all their living costs. But Social Security replaces so little of a typical person’s prior income from working that you can’t rely on it no matter what happens with how Congress adjusts the program in the future.

“You and I are the one who have to save money outside of what we expect from Social Security in order to be able to live with some level of comfort and security,” Clark notes.

More money & retirement stories on Clark.com

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