Diccon Hyatt
Aug. 23, 2023
Older adults are growing more fearful that the Social Security program will run dry, a fear that has some basis in reality, but which may or may not come true.
KEY TAKEAWAYS
- A survey shows three-quarters of U.S. adults over 50 believe Social Security will run out of money in their lifetime.
- A recent report by the Social Security Trustees showed that the trust fund will run out of money by 2034 unless lawmakers take action.
- If the fund runs out, Social Security benefits could still be paid at 80% of their current level.
Three-quarters of people older than 50 believe Social Security will run out of money in their lifetimes, according to a survey of 1,806 U.S. adults by the Harris Poll on behalf of financial services company Nationwide. That’s up from 66% who said the same in 2014.
Indeed, the Social Security trust fund will run out of money by 2034—well within the lifespan of many recipients, if nothing changes, according to an estimate earlier this year by the Social Security Trustees. That’s worrying news for retirees considering that 50% of people aged 65 or older live in households where more than half of their income comes from Social Security benefits, and a quarter live in those where more than 90% of income is Social Security benefits, according to research by the Social Security Administration.
But what exactly is the Social Security Trust Fund, and what would happen if it ran out?
Social Security benefits are paid for by a 6.2% tax taken out of workers’ paychecks (12.4%) for self-employed people. From 1982 through 2020, the taxes were more than enough to pay for benefits, and the extra went into a trust fund that generates interest.
A lower birth rate and aging population mean that every year there are fewer workers to support each retiree, and that’s hurt Social Security’s finances. In 2021, the program has been in the red. In 2022, it paid out $22 billion more than it took in.
If the fund ran out, the program could continue to pay benefits, but the checks would only be 80% of what they are now, the trustees estimated.
Politicians have put forward various ideas to reform the program and prevent its fund from running dry. In 2020 while running for president, Joe Biden proposed doubling Social Security payroll taxes for people earning $400,000 or more. That would buy five more years of solvency, according to an analysis by the Urban Institute think tank.
However, Biden’s proposed budget for the 2024 fiscal year did not include that or any other major changes to the program.
