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  • Writer's pictureBob Brooks

Is Social Security Really Going Away?

Dear Bob, I am concerned about social security being depleted. If this really were to happen within ten years or so at my retirement, what would that look like?

There are two funding sources for social security. First is the social security trust fund, and then the money that comes into the government from collecting payroll taxes. We all have payroll taxes deducted from our paychecks. 

It is important to understand what happens when social security funds are depleted. This means that the social security trust fund will run out of money. When the trust fund runs out of money, social security benefits would solely be funded by payroll taxes collected by the government.  They would be, at that point, only funded by 1 of 2 sources (see above) which is payroll taxes.

Unfortunately, payroll taxes would only fund roughly 70% of current and future social security benefits. Payroll taxes alone would not fund 100% of current and future social security. 

Thus, it is up to the politicians to fix this problem. I have read reports where it wouldn't take too many adjustments to fix the problem initially and put a "patch" on the problem that would fix the problem for the time being (temporarily, not permanently). It could mean a raise of a few percent in payroll taxes or some other less obvious tax increase that most people will not see. 

Will politicians actually work to fix it? They will have to attempt to fix it, at least temporarily, and worry more about the bigger problem down the road (what they always do - kick the can down the road).  No President is going to let social security blow up on their watch.  

Having said all of that, I don't think that people in their mid to late 40s and above will have to worry about dramatic changes in the system. However, anyone younger than their mid-40s will experience a different scenario. Anyone younger than their mid-40s should not be counting on full security benefits to be paid out. Am I saying that they will go away? No, they will probably just not pay as much as they are paying today.     

Note - Estimates of when the trust fund runs out of money vary between 2032 to 2036. Estimates of the social security shortfall range anywhere from 60% to 80%. It is up to everyone to determine how much they want to depend on social security. The above thoughts are just my opinion based on research. 

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