Introduction |
There is an important national discussion going on concerning the future of Social Security. We at the Social Security Administration are often asked about the future of the Social Security program. Below are answers to some of the most frequently asked questions:
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Social Security Benefits |
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I am retired and receiving a monthly check from Social Security. Are my monthly payments going to be cut? |
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No, there are no plans to cut benefits for current retirees. In fact, benefits will continue to be increased each year with inflation. Even without any changes, current benefits are expected to be fully payable on a timely basis until 2037. |
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I'll be retiring in the next five to 10 years. Can I expect my presently scheduled benefits to be paid to me at retirement?
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Most reform plans preserve scheduled benefits, including cost-of-living increases, for near-retirees. However, without change it is expected that the program will no longer be able to pay scheduled benefits in full starting 2037. At that time it is expected that only 76 percent of currently scheduled benefits will be payable. |
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My parents are receiving Social Security payments. Should I be worried that their monthly checks will be cut and that I will have to make up the difference? |
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No, there are no plans to reduce benefits for current retirees. In fact, benefits will continue to grow annually with inflation. Even without any changes, current benefits are expected to be fully payable on a timely basis until 2037. |
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I am receiving disability benefits from Social Security. Should I be worried that my monthly check will be cut?
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Most plans do not reduce the benefits of currently disabled beneficiaries. Without any major change it is expected that the OASDI program will be able to pay current benefits in full until 2037. At that time it is expected that 76 percent of currently scheduled benefits will be payable. While current financing has the DI program unable to pay full benefits sooner, the difference is easily eliminated with a simple reallocation of current tax rate levels, as was done in 1994. |
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I'm 37 years old in 2009. If nothing is done to change Social Security, what can I expect to receive in retirement benefits from the program? |
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Unless changes are made, at age 65 in 2037 your scheduled benefits could be reduced by 24 percent and could continue to be reduced every year thereafter from presently scheduled levels. See the 2009 Trustees Report. |
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I'm 26 years old in 2009. If nothing is done to change Social Security, what can I expect to receive in retirement benefits from the program? |
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Unless changes are made, when you reach age 54 in 2037, benefits for all retirees could be cut by 24 percent and could continue to be reduced every year thereafter. If you live to be 100 years old in 2083 (which will be more common by then), your scheduled benefits could be reduced by 26 percent from today's scheduled levels. See the 2009 Trustees Report. |
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Should I count on Social Security for all my retirement income? |
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No. Social Security was never meant to be the sole source of income in retirement. It is often said that a comfortable retirement is based on a "three-legged stool" of Social Security, pensions, and savings. American workers should be saving for their retirement on a personal basis and through employer-sponsored or other retirement plans. |
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Get an estimate of your retirement benefit using our calculators
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Social Security's Assets |
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Does Social Security have dedicated assets invested for my retirement? |
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Social Security is largely a "pay-as-you-go" system with today's taxpayers paying for the benefits of today's retirees. However, money not needed to pay today's benefits is invested in special-issue Treasury bonds which total over $2.4 trillion today. |
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Is there really a Social Security trust fund? |
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Yes. Presently, Social Security collects more in taxes than it pays in benefits. The excess is loaned to the U.S. Treasury, which in turn issues special-issue Treasury bonds to Social Security. |
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Social Security`s Future |
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I hear that Social Security has a big financial problem? Why? |
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Social Security's financing problems are long term and will not affect today's retirees and near-retirees for many years, but they are very large and serious. People are living longer, the first baby boomers are nearing retirement, and the birth rate is lower than in the past. The result is that the worker-to-beneficiary ratio has fallen from 16.5-to-1 in 1950 to 3.1-to-1 today. Within 20 years it will be 2.1-to-1. At this ratio there will not be enough workers to pay scheduled benefits at current tax rates. |
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What will happen if Social Security is not changed? |
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If Social Security is not changed before 2037, then actions necessary for solvency could include increasing payroll taxes, cutting benefits of today's younger workers, and dedicating some other source of revenue, like transfers from general revenues. Social Security's Trustees state, "If no substantial action is taken until the combined trust funds become exhausted in 2037, then changes necessary to make Social Security solvent over the next 75 years will be concentrated on fewer years and fewer cohorts.” For example, payroll taxes could be raised to finance scheduled benefits fully in every year starting in 2037. In this case, the payroll tax would be increased to 16.26 percent at the point of trust fund exhaustion in 2037 and continue rising to 16.74 percent in 2083. Similarly, benefits could be reduced to the level that is payable with scheduled tax rates in every year beginning in 2037. Under this scenario, benefits would be reduced 24 percent at the point of trust fund exhaustion in 2037, with reductions reaching 26 percent in 2083. See the 2009 Trustees Report. |
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How big is the future problem? |
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Social Security’s current level of benefits will not be sustainable with currently scheduled tax rates. There will be a shortfall of about one fourth of scheduled benefits once the trust fund reserves are exhausted in 2037.
Social Security's Chief Actuary projects that there will be a shortfall over the next 75 years equivalent to about 0.7 percent of the nation’s gross domestic product (GDP). This shortfall is also equivalent to about 1.9 percent of taxable earnings over the next 75 years. See the 2009 Trustees Report. |
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If Social Security's financial problem is so long term (negative cash flows not until 2016 and trust fund exhaustion in 2037), why do we need to fix it now? |
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Addressing the problem now allows our elected policymakers to consider a wider range of options, and gives younger people more time to adjust their own retirement planning decisions. Addressing the problem now will allow today's younger workers planning for their retirement to have a better assurance of the future of Social Security. See the 2009 Trustees Report. |
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2009 Trustees Report |
Social Security Modernization |
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What are the alternatives for modernization and reform? |
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The four basic alternatives that are being discussed -- singular or in combination with each other – are (1) increasing dedicated taxes, (2) decreasing future scheduled benefits, (3) using other financing sources such as general revenues or (4) prefunding future benefits through either personal savings accounts or direct investments of the trust funds.
The Social Security Administration’s Office of the Actuary have analyzed many of the suggestions for reform of the Social Security program, including those introduced in Congress as part of comprehensive solvency proposals or those requested by the independent, bipartisan Social Security Advisory Board. You can learn more at www.socialsecurity.gov/OACT/solvency/. |
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Global Aging |
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Social Security's future challenges are caused by decreased birth rates and the aging of our population. Do other countries have similar problems? |
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Yes. Most countries in Europe, as well as Japan, have more serious challenges than the U.S. Even some developing countries are starting to face up to the aging of their populations. See SSA’s monthly publication International Update for recent developments in the public and private pension systems of other countries. |
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www.socialsecurity.gov
