“Concerns Grow Over Social Security Solvency—How to Safeguard Your Nest Egg”

According to The Sun,  Concerns about the future of Social Security (SS) benefits are intensifying as over 70 million Americans rely on this vital lifeline. The Social Security Administration (SSA) projects that trust fund reserves used to pay these benefits could be depleted by 2035.

Projected Shortfall

While Social Security will continue to exist beyond 2035, the SSA estimates that, without additional funding, beneficiaries will only receive about 83% of their full benefits. This projection has heightened anxiety among current and future retirees, particularly those who depend on these payments as their primary income source.

Funding Structure

Social Security is primarily funded through payroll taxes, with employees and employers each contributing 6.2% of an employee’s wages—totaling 12.4%—on earnings up to $168,600 in 2024.

These contributions are directed into a system that pays benefits to current retirees rather than into a specific fund for each individual. While 85% of payroll tax dollars go to the Social Security trust fund, the remaining 15% supports people with disabilities and their families.

Growing Challenges

The challenge arises from a growing number of retirees and a decreasing number of workers contributing to the system, which could lead to an eventual shortfall. Shannon Benton, executive director of the Senior Citizens League, emphasized the need for Americans to be concerned about their financial futures.

With the trust fund expected to be depleted by 2035, Benton pointed out that simply eliminating taxes on Social Security or making promises to avoid benefit cuts won’t be enough to secure the program’s future. She stressed, “The long-term viability of Social Security is a pressing issue, and voters need to hear clear plans from presidential candidates on how they will address this looming shortfall.”

Importance of Social Security

For millions of retirees, Social Security is a crucial component of their retirement income. It is designed to supplement personal savings and retirement plans, such as 401(k)s or IRAs. However, for many, it constitutes a significant portion of their financial support.

According to the Center on Budget and Policy Priorities, about half of all seniors receive at least 50% of their income from Social Security. A 2024 AARP survey found that 90% of Americans aged 50 and older consider Social Security “very important” to their financial future. The program’s broad political support further underscores its critical role in the retirement landscape.

Cost of Living Adjustments (COLA)

In addition to regular benefits, Social Security includes an annual Cost of Living Adjustment (COLA) to help beneficiaries maintain their purchasing power. This adjustment is based on changes in the Consumer Price Index, as measured by the Department of Labor, from the third quarter of the previous year to the same quarter of the current year.

Also read: Urgent Reminder: Social Security Payments of $1,907 Arriving Soon for Millions of Americans

For 2024, the COLA is set at 3.2%, translating to an average increase of $55 per check for nearly 67 million Americans. This boost began with the December 2023 benefits, which will be paid out in January 2024.

Legislative Action Required

Addressing Social Security’s funding shortfall requires legislative action, and potential solutions vary. Benton noted, “The last time Social Security faced this type of deficit, Congress responded with bipartisan legislation. But now we need to know what today’s lawmakers plan to do.”

“It’s not enough to promise not to cut benefits; we need concrete proposals to protect the system for the next generation,” she added.

Time is of the Essence

With the Social Security trust fund reserves projected to run out by 2035, the program’s future is uncertain. Congressional action is necessary to ensure that retirees receive their full benefits, but the nature of that action remains unclear. Benton highlighted, “We’re looking at a system that, while still functional, is in need of serious repairs.”

The fate of millions of Americans’ financial futures hinges on the decisions made in the coming years. Whether that involves raising taxes, adjusting benefits, or a combination of both, the future of Social Security is an issue that can no longer be ignored.

Upcoming Payment Updates

Additionally, the deadline for receiving September 2024 Social Security checks is approaching. Beneficiaries can find out how much they’ll receive and why. In November, two checks will be issued before the year concludes—stay tuned for exact payment dates.