Will Social Security Still Exist When You Retire?

When working on financial plans for clients, we sometimes encounter skepticism that Social Security retirement benefits will still be available and relevant throughout their retirement.  While we readily agree that younger workers’ retirement benefits are likely to decrease from what they would be under current rules, we think our older clients can have more confidence in their benefits continuing at promised (or close-to-promised) levels well into the future. Of course, retirees will enjoy better outcomes if Congress commits to making policy changes to shore up the Social Security trust funds.  But even if Congress fails to save the Social Security reserves, retirees will continue to receive the majority of their promised retirement benefits throughout their lifetimes.  

The Current Trajectory.  In its annual “Fast Facts” report, the Social Security Administration (SSA) acknowledges that the program is not sustainable at current benefit and tax rates.  The trust fund reserves that help to pay Social Security retirement benefits are on track to be depleted by 2034.  After that point, the program would have to rely completely on payroll taxes and other income* to fund benefits and could only afford 81% of projected program costs.

The Pessimist’s View.  Congress will need to make significant changes to completely close the gap between the inflows and outflows for the Social Security system.  According to Adam Van Deusen of the Kitces financial planning network, right now, Congress could close the gap by:

• Increasing the Social Security payroll tax rate by 3.65% (paid in part by both employees and employers),
• Reducing benefits by 22.4% for all current and future recipients,
• Reducing benefits by 26.8% for future recipients only, or
• Enacting some combination of these— and perhaps other— policy changes, such as significantly increasing or eliminating the Social Security wage base (the maximum earnings subject to Social Security payroll taxes), limiting cost-of-living adjustments for annual benefits, or raising the Social Security full retirement age.

However, the last time that the Social Security system was on a path toward insolvency—in 1983— Congress only approved changes to the system three months prior to the point at which benefits would have had to be reduced.  If Congress waits until the last minute again to take serious action, then the necessary policy changes starting in 2034 would have to be more significant than those mentioned above (which would solve the problem if enacted today).  Furthermore, Congress has approved policies in recent years that have accelerated the drawdown of the trust fund reserves, such as the $6,000 tax deduction for those over age 65 in the One Big Beautiful Bill and the repeal of the Windfall Elimination Provision and Government Pension Offset in 2025 . The closer we get to 2034 without a concerted effort to re-align Social Security payments with available funds, the higher the chance that taxpayers will face noticeable adjustments that negatively impact their incomes.

The Optimist’s View.  Despite a lack of political will for a complete Social Security overhaul, the government has made incremental changes in the past to improve the long-term outlook for retirement benefits.  Like the initial Social Security reform law that President Reagan signed in 1983, which set a course for slowly increasing full retirement age from 65 to 67 over the course of the next 45 years, these changes have been gradual and/or have occurred on the margins of what workers expect to pay and receive.  For example, in 2015 Congress passed a law eliminating the ability of spouses to collect a spousal benefit temporarily and then switch to their own benefit at a later date.  This change did not radically impact how much the affected families could expect to collect in Social Security benefits over their lifetimes, and it did not take effect immediately.  It allowed those within four years of being able to take advantage of that claiming strategy to be grandfathered in.

Ultimately, the Social Security shortfall is a solvable problem that boils down to a math equation.  As mentioned above, a combination of policy changes impacting current workers and retirees could work together to close the gap without one group of the population feeling the bulk of the burden. And, even if Congress completely fails to shore up the system, over 75% of benefits can still be paid with current-year payroll taxes. While it may be prudent to moderately lower expectations about what amount of Social Security benefit you will receive, reductions may not be as drastic as some recipients fear, and it is unlikely that Social Security will go away completely in the foreseeable future.

This Year’s Adjustment.  Again, this year the SSA took a small step toward shoring up their reserves, but since it is a marginal change, most of those affected by it may not even notice.  Each year, the SSA issues two numbers that impact payments into and out of the system for the coming year.  First, the cost-of-living adjustment (COLA) indicates how much retirees’ benefits will increase in the coming year to account for inflation. Second, the Social Security wage base indicates the maximum amount of wages that will be subject to the 6.2% Social Security tax.  For 2026, retirees were given a 2.8% COLA, while the wage base increased by 4.8%, from $176,100 to $184,500.   

Even absent a systemic change in the Social Security program, we believe that Social Security retirement benefits will continue to be available and relevant for decades to come.

If you have questions about your benefits and how they play into your plan for retirement, or simply want to talk through your options, please don’t hesitate to give us a call.

_{*In addition to inflows from payroll taxes, the Social Security system also receives federal income tax revenue attributable to current Social Security benefits.}