Social Security, a federal benefits system for older Americans, turned 89 years old amidst concerns about its solvency leading into the upcoming presidential election. A Gallup poll released in June found that 80% of Americans are worried about the lack of Social Security benefits being available to them in the future. The retirement benefits trust fund is projected to be depleted by 2033, putting pressure on lawmakers to find solutions to save the program. Social Security impacts three groups of Americans: those paying into it, those ready to retire, and those currently receiving benefits.
Financial planner Justin Rush believes that Social Security is more secure than some think, as it won’t cease to exist after the reserve funds are exhausted. However, retirees may only receive around 83% of their benefits if nothing is done to address the issue beforehand. He suggests that changes will be necessary to sustain the program, such as raising the retirement age. Currently, the retirement age to collect full benefits is 67, but there have been proposals to raise it even further, potentially to age 69.
The payroll tax is another aspect of Social Security that has been a point of contention. In 2024, the threshold for earnings subject to the payroll tax is $168,600. Some Democrats have proposed requiring the wealthy, those earning over $400,000, to pay more into the program. However, opponents argue that removing the cap will lead to disparities in benefit payouts upon retirement. The US population has significantly grown since Social Security was established in 1935, which has contributed to the depletion of reserves as there are more older individuals collecting benefits and fewer younger people paying into the system.
The average life expectancy in the US has increased since the inception of Social Security, with people now living into their late 70s on average. This means that individuals are claiming benefits for a longer period, placing further strain on the program. Many younger Americans are already planning for a future without Social Security, preferring to secure their retirement independently. Rush believes that finding a solution to ensure the sustainability of Social Security is in the best interest of both political parties. Both parties will need to come together to address the challenges facing the program and ensure its longevity for future generations.
