Depending on Social Security?

If you’ve ever read the fine print on your annual Social Security statement, you’ll see it written in black and white: “Social Security benefits are not intended to be your only source of income when you retire.” But here’s the real clincher: “The law governing benefit amounts may change because, by 2034, the payroll taxes collected will only be enough to pay about 79% of scheduled benefits.”

That doesn’t mean the program is expected to run out of money, though. It only means that, unless Congress acts, the program will not be able to generate enough revenue to cover the costs of the program.1 That said, given the risk that Social Security could run short of money within a couple of decades, you should plan for the possibility, however remote, of reduced benefits.

Why benefits may fall short: slower growth, aging population

  • In 2018, Social Security’s cost exceeded its income for the first time since 1982, partly due to lower projections for economic and labor-force growth, forcing the program to dip into its $3 trillion trust fund to cover 2
  • The 83-year-old program’s costs are rising because America’s population is aging, and revenue growth is slowing because the economy isn’t growing as fast.

Does that mean you’ll get no Social Security benefits, or reduced benefits? There’s no way to know for certain how the government will address the issue (Congress has debated how to shore up the program’s finances but has not yet agreed on what to do).

Don’t ignore the “What if’s” It may be sensible to consider a couple of alternatives if Social Security runs short of its growth projections — just to be on the safe side. You can do that by estimating your Social Security benefit at 80%, 50% and 0% to see if you will have enough to fuel your future lifestyle and spending needs. Smartasset has a simple calculator at that uses your age, annual income and marital status to project what your annual Social Security payments might look like.

If you’re a younger saver, you may need to change your spending, saving and investing strategies to make up for lost guaranteed income.

1 “David Harrison, “Social Security Expected to Dip Into Its Reserves This Year,” Wall Street Journal, June 5, 2018. to-dip-into-its-reserves-this-year-1528223245

2 Ibid.

3 Jessica Kwong, “Social Security Anniversary: Why, 83 Years Later, the Safety-Net Program is Running Out of Money,” Newsweek, Aug. 14, 2018. https://www.