It seems like Social Security has been “about to run out” for as long as I can remember.

In fact, I distinctly remember my father in the early 1980s confidently declaring that he would never see a penny from Social Security. He was certain the system would collapse before he reached retirement age.

Fast forward a few decades — not only did he receive benefits, but to this day my mother continues receiving his survivor benefit.

So, what gives? Is Social Security perpetually on the brink of disaster… or is this just political background noise? Let’s unpack it calmly.

The Question That Shows Up on Your Statement

If you’ve reviewed your Social Security statement, you may have noticed a section titled:

“Will Social Security Be There for Me?” written by the Social Security Administration.

The statement is refreshingly direct. It says that, without legislative changes, beginning in 2035, Social Security would only be able to pay about 83% of scheduled benefits.

That sounds alarming at first glance. But it’s important to understand what that actually means — and what it does not mean.

It does not mean Social Security goes bankrupt.
It does not mean checks stop.
It does not mean the trust fund disappears into thin air.

It means that if Congress does absolutely nothing, incoming payroll taxes would cover about 83% of promised benefits after the trust fund reserves are depleted.

That’s a funding gap — not a collapse.

Why Is There a Shortfall?

The issue is largely demographic.

When Social Security was created in 1935, there were many workers supporting each retiree. Today, people are living longer, and birth rates have declined. We have fewer workers paying into the system relative to the number of retirees drawing benefits.

This was always predictable. Actuaries have been projecting it for decades. It isn’t a surprise — it’s math.

What Happens Next?

Historically, Congress has stepped in before actual benefit cuts occurred. The last major reform was in 1983, when lawmakers adjusted payroll taxes and gradually increased the full retirement age.

It is highly unlikely that lawmakers will simply allow a sudden 17% across-the-board benefit cut in 2035. Social Security is one of the most politically sensitive programs in the country. Millions of Americans rely on it. Doing nothing would be… let’s just say… electorally unpopular.

More likely outcomes include:

• Increasing the payroll tax rate
• Raising or eliminating the wage cap
• Gradually increasing full retirement age
• Adjusting benefits for higher-income retirees
• Some combination of the above

The eventual solution will probably involve shared adjustments rather than dramatic cuts.

Should You Be Worried?

Concerned? Reasonable.
Panicked? No.

Social Security was never designed to be your entire retirement plan. It is a foundation — a base layer of guaranteed income adjusted for inflation.

If your retirement plan depends entirely on Social Security, that’s a planning issue — not a political one.

For most higher-income households, Social Security replaces a modest percentage of pre-retirement income. Even if benefits were reduced to 83%, it would not derail a well-constructed retirement strategy.

But if someone is counting on every dollar of that benefit to meet essential expenses, we plan more conservatively.

The Bigger Perspective

Social Security has faced “imminent collapse” headlines for decades. Yet here we are.

My father was certain it would disappear. It didn’t. My mother still receives the benefit he earned. That doesn’t mean we ignore the funding gap. It does mean we keep it in perspective. Programs of this scale tend to evolve — not vanish.

The Planning Takeaway

Here’s how we approach it with AFG clients:

• We assume Social Security will exist.
• We generally assume that you will take it at your normal retirement age (and not defer to age 70). If you retire before your full retirement age (FRA) and are not working (and have no plans to work above the qualifying income level), we then prepare scenarios comparing the outcome of starting Social Security early or waiting until FRA. 
• We do not build a retirement plan that depends entirely on politicians behaving perfectly.

Social Security is not “in trouble” in the sense of disappearing. It needs legislative adjustment — and that’s very different.

If you’d like to review your own Social Security statement and see how your benefits fit into your broader retirement plan, please schedule time with your advisor. Headlines make good drama. Planning makes good outcomes.

Reference

https://www.ssa.gov/people/materials/pdfs/EN-05-10229.pdf

Kristina Bolhouse, CPA/PFS, CFP®

President

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