The sky is falling, winter is coming, and Social Security will run out of money.

Two of those statements are absolutely NOT true. A look at the calendar – not to mention the record cold weather for much of the country – tells us that winter is just around the corner.

That means that the sky isn't falling, and it also means that Social Security will not run out of money.

Yet, there remains the constant fear that "we" can't afford Social Security, and that it will be insolvent in less than a decade. There are plenty of things to fear in the 21st century, including another pandemic, a nuclear war, and the streaming services all raising their rates at the same time.

What we shouldn't fear is that Social Security will either be too costly to support, or that it will run out of money.

Social Security Is Still Going Strong

Social Security is financed through a dedicated payroll tax, where employers and employees each pay 6.2 percent of wages up to the taxable maximum of $160,200 (in 2023), while the self-employed pay 12.4 percent.

"Total income, including interest, to the combined OASI and DI Trust Funds amounted to $1.222 trillion in 2022. ($1.107 trillion from net payroll tax contributions, $49 billion from taxation of benefits, and $66 billion in interest)," the Social Security Administration explained. "The payroll tax rates are set by law, and for OASI and DI, apply to earnings up to a certain amount. This amount, called the contribution and benefit base, or taxable maximum, rises as average wages increase."

In other words, as long as people keep working and paying their taxes, Social Security will be funded.

Will It Run Out of Money?

A common refrain about Social Security is that it is a giant Ponzi scheme and will collapse just like one. That's not quite accurate, even as it is true Social Security is going to reach a point where it will pay out more than it can take in.

Though its reserve funds will be depleted, the majority of its benefits will still be covered by taxpayers.

Moreover, even if Congress is unable to adjust the structure of the program by 2035 – including via tax increases, benefit reductions, or another method – Social Security will be able to continue providing benefits to elderly Americans just as it has done for decades.

Less Money, Not No Money

The key point is that in the worst-case scenario – if nothing is done – Social Security may have to reduce payments by as much as 20 percent as early as 2032. Currently, upwards of 66 million people receive benefits, with the average coming in around $1,691 according to January 2023 data from the Social Security Administration (SSA).

Those cuts could see the payments reduced to $1,352 – which would essentially wipe out the cost of living adjustments (COLAs) that have bumped up the payments in recent years to keep track with inflation. That is bad news for the huge majority – 88 percent – of Americans who have said that they are counting on Social Security to see them through retirement.

Yet, the key point is that Americans who are set to receive the benefits will still get something. It just won't be as much as initially touted. In other words, as those of Generation X reach the age of retirement there will simply be a little less for them.

But GenX has always been resilient. It could mean working a few years longer, doing more with a little less and perhaps starting to think about retirement right now. It could be the Millennials that may have it even worse, as they've been the ones to struggle with student loans and higher housing costs.

And finally, this is a problem only if absolutely nothing is done. 

Social Security benefits are sure to be a campaign issue in 2024, 2026, 2028 and beyond. Lawmakers always listen to angry seniors – and we can only imagine the wrath of GenX when it hits its "golden years."

Author Experience and Expertise

Peter Suciu is a Michigan-based writer. He has contributed to more than four dozen magazines, newspapers, and websites with over 3,200 published pieces over a twenty-year career in journalism. He regularly writes about military hardware, firearms history, cybersecurity, politics, and international affairs. Peter is also a Contributing Writer for Forbes and Clearance Jobs. You can follow him on Twitter: @PeterSuciu.

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