Social Security: It Will Still Be There

A question I have heard for decades is “Will Social Security be there when I retire?” The answer is yes.  Similarly with the 2024 election, I’ve been repeatedly asked about how the social security system will be modified, gutted or even eliminated.  The question has been the same, both before and after the election, and if asked with political culpability, it has been the same question from both democrat and republican supporters.

While I cannot tell you exactly what the program will look like years down the road, I can give you a high-level perspective in this short article of how it works. Make no mistake, the program needs some sort of reform. The Trustees Reports are available ssa.gov/oact/TR/2024/index.html , with page 13 of 2024’s report warning us that Social Security’s trust funds are projected to become depleted in 2033, just a few short years from now, if legislative change is not enacted.  This is no surprise, by the way.  Since 2012, the trustees reports have indicated that social security’s OASDI (Old Age, Survivors and Disability Insurance) trust fund reserves would become depleted sometime between 2033 and 2035 if nothing is done.  It’s up to congress to figure out what that legislative change should be. You can view proposed changes at ssa.gov/oact/solvency/index.html .

What’s been misunderstood by so many people, is how the program works. Many believe there is a pot of social security money that pays out monthly benefits, it’s been “robbed” by politicians taking cash from the trust fund and spending it elsewhere, and once it’s broke, the program is done, kaput! Fortunately, it’s quite different from that.

Millions of us get up and go to work each day. The income we earn is taxed. In 2025, employees pay 6.2% of their first $176,100 of wages, salaries, etc., in social security tax. Employers match that, paying an additional 6.2%, for a total of 12.4% on that $176,100 wage base. For those of us who are self-employed, we pay the whole 12.4%. Income subject to social security taxation has increased substantially: for example, in 2020, it was $137,700.  That is a 27.9% increase!  The money that is collected as a tax is sent to an office of the federal government where it is deposited into designated trust funds.  The trust funds are managed by the United States Treasury Department, who provides the accounting services for the social security program and manages the accumulated assets in the trust funds. Just as efficiently as the money comes in, it goes out in the form of payments to beneficiaries who are retired, disabled or widowed. Accumulated funds are invested in “special issues” of the United States Treasury. These special issues are only available to the trust funds and by law, must guarantee both principal and interest from our federal government. Neither congress nor any politician can take money from social security’s trust funds to spend elsewhere. Trust fund money is invested in the special issue bonds, which in turn are paid back when the special issue bond is redeemed, much like if you or I were to purchase a bond as an investment and later cash that bond in to use the principal and accumulated interest.  

Social Security is largely a pay-as-you-go system. According to ssa.gov, “In 2010, the program paid more in benefits and expenses than it collected in taxes and other noninterest income, and the Trustees Reports project this pattern to continue for the next 75 years.”[i]  If benefit payments (money going out) exceed tax collections and interest earned (money coming in), then principal from the trust funds may be used to fund the gap. This is much the same as if your personal expenses exceeded your income, you’d need to dip into your savings. Thus, if this continues and nothing is done, and if the trustee’s reports accurately predict the depletion of the trust funds in 2033, it is estimated that about three-quarters of scheduled benefits could continue to be paid each year[ii]. This means that the money coming in through taxation after 2033 would pay out about 3/4 of what has been projected to be paid out as future benefits. 

While social security was never intended to fully fund our retirements, it is a substantial part of retirement income for many. The maximum retirement benefits for new recipients in 2025 are as follows:

$2,831 / mo ($33,972/year) at age 62

$4,403 / mo ($52,836/year) at age 67

$5,108 / mo ($61,296/year) at age 70 ii

A couple both receiving max benefit at age 67 would collect $105,672 in 2025, while a couple both earning the max benefit at 70 would take home $122,592 in social security income. The estimated average benefit paid to retired workers in 2025 is $1,976 per month. iii

Don’t believe the scare tactics or hype that social security won’t be there in the future. Sensationalism sells. When you view advertisements, watch the news, receive a solicitation or seminar invitation in the mail, note the source and ask yourself what their motive may be. Yes, the program needs reform. The last major reform was in 1983[iii]. But to say that social security is going away is extreme.

Why am I confident that social security will survive? It is largely a pay-as-you-go system, backed by the full faith, credit and taxing authority of the United States government. As long as there are people who work and the government’s ability to tax their incomes, social security will still be there.

LouAnn Schulfer of Schulfer & Associates, LLC Wealth Management can be reached at (715) 343-9600 or louann.schulfer@lpl.com TheWealthInformationLady.com  SchulferAndAssociates.com , or louann.biz