The Future of Social Security Benefits [Post 40]

What is Social Security?

Social Security is a federal program that provides a monthly source of income to retirees and other eligible individuals. Workers pay into the system through payroll taxes, and in return, they receive benefits in retirement. Benefits may begin as early as age 62, or sooner for special cases like disability.1

The Problem

In 2024, the Social Security Board of Trustees estimated that by 2033 tax revenue would only support around 79% of scheduled benefits.2 If no changes are made, benefits will be impacted.

Why is this Happening?

Per the SSA, Americans are living longer while birth rates are declining.3 Meaning fewer workers are paying into the system relative to the number of retirees drawing benefits. Translation: Less money in, more money out.

What Are the Options to Fix It?

Per the SSA Report, lawmakers have some options to fix the issue:2

• Raise the payroll tax rate (currently 6.2% for employees)

• Lift the wage cap (only income up to $168,600 is taxed for Social Security in 2024)

• Raise the full retirement age (currently 67 for those born in 1960 or later)

• Reduce future benefits (with a likely focus on high earners)

• Or some combination of the above/other alternatives

Bottom Line

Social Security is unlikely to be going away – but changes are necessary. Without reform, benefits could be reduced by around 21% starting in 2033. Lawmakers have several options to shore up the system, and while none are politically easy, doing nothing isn’t sustainable.

Works Cited

1.      Connett, W. (2024, August 15). Social Security Explained: How It Works and Types of Benefits. Investopedia. https://www.investopedia.com/terms/s/socialsecurity.asp

2.      Social Security Administration. (2024). A Summary of the 2024 Annual Reports. https://www.ssa.gov/oact/TRSUM/

3.      Social Security Administration. (2024). What young workers should know about Social Security and saving [PDF]. https://www.ssa.gov/newsletter/Statement%20Insert%2025+.pdf