Talk of Social Security’s trust fund potentially drying up in the 2030s has led many younger Americans to assume the entire program will disappear. But that isn’t the case.
The Nationwide Retirement Institute’s 2024 Social Security survey, conducted between April 19 and May 13, 2024, found that nearly 1 in 4 (23%) U.S. adults believe they won’t receive any of the Social Security benefits they’ve earned. This concern is particularly high among Gen Z (41%), millennials (36%) and Gen X (26%).
This bleak outlook misses an important fact: Even if the trust fund is depleted, payroll taxes will continue to cover the majority of Social Security payments. Here’s what it really means and why it matters.
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How Social Security Works
“Social Security currently has two funding sources. One is the Social Security Trust Fund, which accounts for about 20% of benefits, and the other — roughly 80% — comes from ongoing payroll taxes,” George McFarlane, president of 7 Waters Advisors in Longview, Texas, wrote in an email. “The trust fund is a surplus account that’s being gradually depleted.”
Social Security is a pay-as-you-go system. When you pay Social Security tax, that money pays current Social Security recipients. When you retire, your benefits will be paid by the people currently paying into the system at that time.
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Is Social Security Going Away?
Even if the trust fund runs out, the system won’t collapse. As long as people are working and paying taxes, benefits will continue to be paid — just at a reduced level.
“It’s very unlikely that Social Security will ever go away. The politician who ends Social Security will likely end their career. The public backlash would be a tsunami from which they’d never recover,” McFarlane explained. “Lawmakers would prop it up with matchsticks if they had to.”
And this isn’t the first time we’ve faced similar concerns, according to McFarlane.
As part of a bipartisan reform effort in the early 1980s, President Reagan and Congress made significant changes to Social Security. These included taxing Social Security benefits for higher earners, increasing payroll taxes, raising the full retirement age and modifying the way cost-of-living adjustments (COLAs) were calculated.
“In short, the benefits were trimmed and the costs increased — but the program survived,” he said. “We’re likely approaching another round of reform in the coming years. We may see another increase in the full retirement age (FRA), higher payroll taxes, increased costs related to Medicare and potentially reduced benefits.”
Why You Can’t Rely on Social Security Alone
Social Security is likely here to stay, but it shouldn’t be your only source of retirement income. As of the end of 2024, the Social Security Administration found that among those 65 and older, 12% of men and 15% of women relied on Social Security for 90% or more of their income.
Americans age 65 years and older spend about $59,008 per year, or a little over $4,917 per month, according to the U.S. Bureau of Labor Statistics’ Consumer Expenditure Survey for 2022-2023. Meanwhile, the average Social Security benefit per month for a retired worker is around $1,976 as of January 2025.
“That’s why it’s so important to save and invest for your own retirement. Social Security should just be the icing on your retirement cake — not the cake itself,” McFarlane said. “Your goal should be to build such a nice retirement cake that even if your icing is very thin, you’ll still enjoy your desserts.”
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Sources
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The Nationwide Retirement Institute, “2024 Social Security Survey.”
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George McFarlane, 7 Waters Advisors
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Social Security Administration, “What is the average monthly benefit for a retired worker?“
This article originally appeared on GOBankingRates.com: Myth-Buster: Is It True Social Security Will Be Gone by the Time You Retire?
