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Is Social Security Going Bankrupt?

We regularly receive questions from clients and prospective clients about the long-term health of Social Security. Earlier this month the US Department of the Treasury released its annual Social Security and Medicare Trustees Reports. After the report was released, you didn’t have to look very hard to find negative headlines.


Social Security Warning Issued: 'Heading for Trouble'

Published May 07, 2024 at 6:38 AM EDT Updated May 07, 2024 at 11:07 AM EDT


It sounds pretty dire. We know a lot of folks, especially those who aren’t receiving Social Security benefits yet, feel the same way. Insolvency sounds scary but we don’t believe the situation is as grim as the headlines would have you believe. We went through the actual report and here’s what it says: If Congress does not act by 2035, the trust fund reserves are projected to be depleted. (This is actually a slight improvement from last year’s report which said the reserves would be depleted by 2034.)  However, even if the reserves are depleted, the income from payroll taxes would cover 83% of scheduled benefits. Yes, more money would be going out than coming in, but the shortfall is only 17 cents on the dollar.  So, it’s not like benefits would completely stop. Here is a chart from the report that takes things out even further:




By the year 2098, they project tax revenue will cover 73% of the benefits. First, not many of us need to worry about Social Security benefits in 2098.  Second, that’s a long time to make changes to shore things up. There are three potential scenarios when thinking about these numbers

  1. People should consider that their Social Security benefits will get reduced, starting in the 2030s.

  2. Politicians still have time to act but taxes might be going up to reduce / avoid any shortfall.

  3. The U.S. government likes to spend money and we can print more of it so we will simply go into more debt to cover the shortfall.


If we had to guess, a combination of 2 and 3 are the most likely outcomes. No politician in their right mind would slash Social Security benefits for retirees or those nearing retirement. You don’t get elected or reelected that way. There are no guarantees when it comes to the actions of politicians but we feel it is highly unlikely they would do something that would negatively impact so many people.


Social Security is the most important retirement plan ever enacted in America. According to the Center on Budget and Policy Priorities, nearly 23 million adults and children would fall below the poverty line in the US without Social Security. That includes nearly 17 million people 65 or older and almost 1 million children.  Without Social Security, 4 out of every 10 senior citizens would be in a life of poverty. Nearly half of senior citizens receive 50% or more of their income from Social Security. One in 5 people 65 or older gets 90% of their income from the program. To some people, Social Security supplements their income. To many others, it’s their main source of income.


Bottom Line: Social Security is not bankrupt and the possibility that our government lets it go insolvent in the future is highly unlikely. 


As always, please give us a call if you would like to discuss this in more detail.  Thank you for the opportunity to serve you and your family.

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