Social Security is Not Going Bankrupt

Myth No. 1: Social Security is, or will be, ‘bankrupt’ Words matter. Social Security will not run out of money. The program is financed by payroll taxes, so as long as workers pay into the system, money will always come in. Last year, an estimated 183 million people had earnings subject to Social Security payroll taxes, according to the trustees’ report. Those taxes are collected under the Federal Insurance Contributions Act (FICA). Employers and employees each pay 6.2 percent of wages up to the taxable maximum of $168,600 for 2024. If you’re self-employed, you pay the entire 12.4 percent tax rate. It’s the Social Security Trust Funds’ reserves that are projected to become depleted. What’s happening is much like financial difficulties individuals may face, Goss said: Suppose you have a major financial crisis and use up the money in your bank savings account. You’re still working, so cash is coming in, but it might not be enough to pay all your monthly obligations. The Old-Age and Survivors Insurance (OASI) program, which pays retirement and survivor benefits, will be able to pay 100 percent of benefits until 2033. Even if Congress fails to act, there will be enough projected income coming in to cover 79 percent of scheduled benefits. “We’re not bankrupt,” Goss said. “We’re not without money. We just wouldn’t have that reserve to make up the full 100 percent.” Myth No. 2: Young adults won’t benefit from Social Security This myth is an offshoot of the first one. Findings previewed from an upcoming West Health-Gallup Aging in America report show that 91 percent of adults 18 to 39 are “extremely worried” that Social Security will not be available when they become eligible. When asked how important Social Security will be to them as they age, more than 78 percent answered: “Extremely important.” Some proposed changes to the program could affect younger workers, such as raising the age when full benefits kick in. For anyone born in 1960 or later, full retirement benefits are payable at age 67. Because so many Americans rely on Social Security, it’s not going anywhere. The national poverty rate for people age 65 and older was 10.9 percent in 2022, according to the Census Bureau. “We should have no fear about reaching a point where there will be a generation where there will be nothing available for them,” Goss said. Myth No. 4: The federal government has raided the Social Security Trust Fund Share this article No subscription required to read Share “There’s no trust fund,” one reader wrote in response to a recent column on this topic. “The money was stolen and spent on bridges to nowhere.” Not true. Think of the Social Security Trust Funds like your savings account, Goss said. And the bank then repays you, with interest, when you make a withdrawal. When you make a deposit, the bank takes your money and puts it to work by lending it out for home or auto loans. By law, every dollar of income coming into the Social Security Trust Funds is invested in interest-bearing securities backed by the full faith and credit of the United States, Goss pointed out. Yes, that money has been spent for other government needs, but that does not mean Social Security gets worthless I.O.Us, he said. The securities held by the trust funds have always been honored, as have all other Treasury securities. Myth No. 5: Members of Congress don’t pay Social Security taxes “Congress needs to include its members in Social Security,” another reader said. “They need to pay into the system.” This sentiment reflects the frustration that Congress is taking its own sweet time in fixing the shortfall. Since lawmakers don’t pay Social Security taxes, they don’t have enough of an incentive to find a solution, the argument goes. However, as part of amendments to the Social Security Act in 1983 (the last major reform), all members of Congress began participating in Social Security as of January 1984, regardless of when they were first elected to Congress. I understand why folks think lawmakers don’t have an interest in tackling this problem sooner rather than later. But it’s a dysfunctional Congress and the resulting legislative gridlock, not self interest, that are delaying a fix. -Michelle Singletary in the WaPost