Here's What Social Security Could Look Like in 10 Years if We Don't Fix It

Social Security forms an essential part of most seniors' retirement plans, with over a third of adults 65 and older relying upon it for more than half their retirement income. Even for those with personal savings, life would be a lot less comfortable if those monthly checks suddenly stopped.

Fortunately, Social Security isn't expected to disappear in the foreseeable future, but it is facing a major funding crisis. Here's where we're headed right now if the government doesn't intervene.

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Here's what Social Security could look like in 2034

The latest Social Security Trustees Report, published last year, shows that the combined Social Security trust funds are expected to be depleted in 2034. These are a key source of funding for the program, alongside the Social Security payroll taxes workers pay and the benefit taxes an increasing number of seniors pay on their checks.

There are two Social Security trust funds: The Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund. As you can probably tell from their names, the OASI fund pays benefits to retired and deceased workers and qualifying family members. The DI fund pays checks for disabled workers and their families.

The DI trust fund is not expected to be depleted during the 75-year period the report looked at -- 2023 to 2097. But the OASI trust fund is projected to be depleted in 2033. This would result in benefit cuts. Congress has authorized the transfer of funds between the OASI and DI in the past, and it could do it here. But that would only buy Social Security recipients one more year.

Beginning in 2034, the Social Security Administration would have to cut benefits by 20% for all recipients. Then checks would shrink by an additional 6% between 2034 and 2097. This would put a serious strain on the budgets of the millions of seniors who depend on these benefits to cover their essential living costs.

There's still time to fix it

Fortunately, the above scenario isn't likely. The government is aware of Social Security's funding crisis, and many Congresspeople have already proposed ideas for how to resolve this issue. Nothing's been decided yet, but some potential fixes include:

  • Raising the Social Security payroll tax rate (currently 12.4% split equally between employee and employer)
  • Raising the ceiling on income subject to Social Security payroll tax ($168,600 in 2024) or eliminating that ceiling entirely
  • Raising the full retirement age (FRA), which is when workers are eligible for their full benefits based on their work history
  • Reducing cost-of-living adjustments (COLAs) that help Social Security keep pace with inflation

Perhaps part of the reason there's no clear solution yet is that many of the proposed options could wind up hurting workers, seniors, or both. Higher Social Security taxes could make it more difficult for workers to save for retirement, while reducing COLAs or increasing the FRA would result in smaller benefits for seniors.

Other proposed options could reduce Social Security benefits for high earners while leaving lower earners' benefits untouched. But so far, nothing is standing out as an obvious answer. Whatever the government does will likely involve multiple tactics, but only time will tell.

What can you do?

If you have any ideas about how the government should address this funding crisis, contact your Congressional representatives to share your thoughts. Beyond that, we just have to wait and watch to see what the government decides.

If you'd like to be more proactive, it's best to focus on aspects of your retirement that you can control. Try to set aside as much of your own money for retirement as you can. If you qualify for a 401(k) match, put your cash there first. And if you don't have access to a workplace plan, consider an IRA or a health savings account (HSA) to house your money.

Delaying Social Security could also help you squeeze the most out of the program. Right now, you become eligible at 62, but you grow your checks a little for every month you wait to apply. This continues until you qualify for your maximum benefit at 70. That's not likely to change even if the government alters Social Security. Of course, waiting to sign up means you'll have to cover your expenses on your own until then. But you could rely upon personal savings, or consider delaying retirement until you're ready to apply.

Hopefully, the next few years will provide clarity about what the future holds for Social Security. When the government does announce changes, take some time to adapt your retirement plan so you're as prepared as possible.

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