Social Security is one of the most critical safety nets in the United States, providing financial support to millions of retirees, disabled individuals, and their families. However, discussions about its future often come with alarming headlines that suggest the program is “going broke.” While Social Security faces long-term financial challenges, the truth is more nuanced.
Here’s why we can confidently say that Social Security is not going broke.
1. Social Security Is Self-Funded
Social Security is funded primarily through payroll taxes, collected from both workers and employers. This money goes into the Social Security Trust Funds, which are used to pay out benefits. As long as workers are earning wages and paying payroll taxes, Social Security will continue to receive funding. The program is not dependent on annual appropriations from Congress, so it can’t simply “run out of money” in the traditional sense.
2. Trust Funds Are Still Solvent
The Social Security Trust Funds, specifically the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds, currently hold substantial reserves. As of the latest reports, these trust funds have trillions of dollars in assets. Although these reserves are projected to be depleted by the mid-2030s—around 2034 or 2035—this doesn’t mean that Social Security will stop paying benefits. It means the program will rely solely on incoming payroll taxes, which are expected to cover approximately 75% to 80% of scheduled benefits even after the reserves are exhausted.
3. Continuous Payroll Tax Revenue
Even after the trust funds are depleted, Social Security will continue to collect payroll taxes from current workers. This steady stream of revenue ensures that the program can continue to pay out benefits, albeit at a reduced level if no reforms are made. This ongoing revenue is a key reason why Social Security isn’t going “broke”—it will still have money coming in, just not enough to cover full benefits as currently promised.
4. Political Will to Address the Shortfall
Social Security is one of the most popular and widely supported programs in the U.S., across political parties and demographics. Given its importance, there is strong political incentive to address the financial challenges facing the program. Potential solutions include raising the payroll tax rate, increasing the cap on taxable income, adjusting benefits, or even using general tax revenues to supplement the program. While these options require difficult decisions, the program’s widespread support makes it likely that lawmakers will act to preserve its solvency.
5. Historical Precedent for Reform
Social Security has faced financial challenges before. In the early 1980s, the program was on the brink of insolvency, but Congress enacted a series of reforms that extended its solvency for several decades. These reforms included increasing the retirement age, raising payroll taxes, and making benefits partially taxable. This precedent shows that while Social Security may face financial issues, it has a history of being adapted and reformed to meet changing economic realities.
6. Not Going Broke, But Needing Reform
It’s important to distinguish between “going broke” and needing reform. While Social Security is not on the verge of disappearing, it does require adjustments to ensure its long-term viability. The potential shortfall in the mid-2030s signals the need for proactive measures to strengthen the program, but it does not mean that Social Security is failing or bankrupt.
Conclusion
Social Security is not going broke. While it faces challenges due to demographic shifts and economic factors, the program has a reliable funding mechanism, significant political support, and a history of successful reform. The projected depletion of the trust funds in the 2030s does not mean the program will cease to exist; rather, it will require adjustments to maintain its full benefit payments. With timely and thoughtful policy changes, Social Security can continue to provide crucial support to future generations.
Understanding these realities is essential in dispelling the myths surrounding Social Security’s future and in ensuring that the program remains strong for years to come.