AARP Hearing Center
Key takeaways
- With the number of retirees growing faster than the number of workers paying into Social Security, the system is projected to deplete its trust fund in 2034.
- That doesn’t mean Social Security would disappear, but it would mean the system could only pay about 81 percent of scheduled benefits.
- Congress has a range of options to stabilize Social Security’s finances and is likely to act before the trust fund runs dry, as it has in the past.
Summary
Social Security will continue to pay benefits beyond 2034, but without action from Congress, payments would be reduced to around 81 percent of scheduled amounts due to depletion of the system’s trust fund, explains Carly Roszkowski, AARP’s vice president of financial resilience programming. Social Security is funded separately from the main federal budget through a dedicated trust fund, but demographic changes — notably a long-term decline in the ratio of workers paying into Social Security to retirees receiving benefits — are draining the system’s surplus funds.
When needed, Congress has always taken steps to shore up Social Security’s financial stability, and it is likely to do so again, Roszkowski says. Any changes would likely be phased in gradually, protecting current recipients and minimizing abrupt disruptions, but the impact could be significant for future generations. It’s more important than ever to stay informed about Social Security and to build your own retirement savings proactively. Social Security remains a vital financial foundation, but robust personal savings can give you greater security and flexibility as you plan for retirement.
The key takeaways and summary were created with the assistance of generative AI. An AARP editor reviewed and refined the content for accuracy and clarity.
Full Transcript:
[00:00:00] Jackie from Illinois asked us, “Will Social Security keep making my payments after 2034?”
[00:00:06] Here’s what you need to know. Well, Jackie, the short answer is yes, but if Congress doesn’t act,
[00:00:12] your payment would be reduced. Here’s why. Social Security isn’t part of the main federal budget
[00:00:18] that you hear a lot about. It runs on its own account, which we call the trust fund. When you pay Social Security tax in your paycheck, that
[00:00:27] money goes into the trust fund. That money is used to pay today’s Social Security payments. For years, the system took in more than it paid out, creating a big surplus.
[00:00:38] But with more Americans than ever before, reaching retirement age and slower growth in the number of younger workers, benefit payments
[00:00:46] are now outpacing those tax revenues. The latest projections from Social Security’s trustees
[00:00:52] indicate that the trust fund reserves will be depleted by 2034. Payroll taxes will still be coming in, but they won’t be enough to cover Social
[00:01:02] Security’s full benefit obligations. Now, this doesn’t mean Social Security vanishes overnight.
[00:01:08] It means that without legislative changes like raising taxes or cutting benefits,
[00:01:14] Social Security would only be able to cover about 81% of scheduled payments.
[00:01:19] That’s a significant cut for millions of Americans who rely on these payments. Why is this happening?
[00:01:25] Well, for starters, back in 1970, there were nearly four workers for every Social Security beneficiary.
[00:01:33] Today, that number has dropped to under three, and by 2035, it’s projected
[00:01:38] to drop to under two and a half. Around 2.4 workers. The good news is Congress is almost certainly guaranteed to act before
[00:01:46] the trust funds run out, and we also know there are a range of policies Congress can choose from.
[00:01:52] The last time the trust fund got close to running out was in 1983, which was the last time Congress passed a major Social Security bill, and that time they
[00:02:01] decreased some benefits by raising the retirement age and changing some formulas. And they raised some taxes on higher income earners.
[00:02:10] Those are the same policies Congress is likely to look at again. What does this mean for you? Well, last time Congress needed to address Social Security,
[00:02:18] it phased in the change to the retirement age over 33 years. So if you’re already getting Social Security or you will be soon, it
[00:02:27] probably won’t affect you much. Any changes are likely to be phased in gradually to minimize
[00:02:33] disruption and protect current beneficiaries. For younger generations, it’s more likely that some combination of these changes could affect you.
[00:02:42] This is why it’s so important to be informed and to advocate for the solutions that you want to see in Social Security.
[00:02:49] Social Security is a crucial pillar of income, but having robust retirement savings to draw on will give you more security.
[00:02:57] Saving as much as you can and as early as you can is always a smart strategy.
[00:03:02] So now you know. Thanks for watching. You can read more about what is going on with your Social Security at aarp.org/socialsecurity. And if you’re worried about the future of Social Security, it’s really important for your representatives in Congress to hear from you. You can leave them an email from that link as well. Please leave any Social Security questions you have in the comment section below so we can answer them in future videos.
[00:03:10] Until next time.
