Skip to main content
diversification.com
Personal Finance

Social Security Isn’t Dying – But Your Savings Might

“Social Security is going broke!” It’s the kind of headline that sparks anxiety—and it’s easy to see why. For many Americans, Social Security isn’t just another government program. It’s the backbone of retirement planning.
ByAlexander Harmsen
Fact checked byDiversification.com Compliance Team
Social Security Isn’t Dying – But Your Savings Might

“Social Security is going broke!” It’s the kind of headline that sparks anxiety—and it’s easy to see why. For many Americans, Social Security isn’t just another government program. It’s the backbone of retirement planning.

But here’s the thing: the truth is more nuanced than the doomsday stories suggest.

Is Social Security really running out of money?

Not exactly. While Social Security faces serious funding challenges, it’s not going away. According to the SSA’s 2024 Trustees Report, the program’s trust funds are projected to be depleted by 2035. After that, ongoing tax revenue will still cover about 83% of scheduled benefits. What’s truly at risk isn’t the existence of Social Security—but the expectation of receiving full benefits without a backup plan. And that’s where many people could get caught off guard.

This breakdown looks at what’s actually happening, what it means for future retirees, and why personal savings matter now more than ever.

Key Takeaways

  • Social Security isn’t going away—but it could shrink.
  • Benefits may be reduced by around 17–25% starting in the 2030s.
  • The program will still pay out a significant portion of scheduled benefits.
  • A solid savings strategy will be more important than ever.

How Social Security Is Funded

Social Security benefits are paid out of two trust funds:

  • OASI (Old-Age and Survivors Insurance)
  • DI (Disability Insurance)

They’re primarily funded through payroll taxes—12.4% of wages, split between workers and employers.

For years, the program took in more than it paid out. But with more retirees living longer, and fewer workers per retiree, the math has shifted. Now, the trust funds are expected to run dry unless something changes.

According to the 2024 Social Security Trustees Report:

  • The reserves could be depleted by 2035.
  • Even then, payroll taxes would still cover about 83% of benefits.

So, Is Social Security “Running Out”?

Not really.

Even if the trust funds are depleted, incoming payroll taxes will continue to fund most of the program. That means Social Security isn’t disappearing—it’s just facing a potential pay cut.

Historically, Congress has acted to preserve Social Security when funding challenges arose. For example, in 1983, a bipartisan reform package helped stabilize the system by gradually increasing the full retirement age and introducing taxation on benefits. Looking ahead, potential solutions could include raising payroll taxes, further adjusting the retirement age, or reducing benefits for higher-income earners.

What This Means for Retirement Planning

This matters especially for younger generations—those in their 20s, 30s, and even 40s—who still have decades to go before retirement. Any benefit reductions would directly affect them, and the compounding impact of not saving early could be significant. Starting now gives time to build the kind of financial cushion that Social Security may no longer fully provide.

Here’s the reality: depending solely on Social Security could leave a serious gap in retirement income.

Let’s say someone expects to receive $2,000 per month. If a 20% cut happens, that drops to $1,600—a difference of $4,800 a year. Over a 25-year retirement, that adds up to $120,000 that needs to be made up elsewhere.

That’s why building a personal safety net is so important.

Steps to Strengthen a Retirement Plan

Maximize Tax-Advantaged Accounts

  • Make the most of 401(k)s, IRAs, and Roth accounts. Take full advantage of employer matching and compound interest.

Save Consistently

  • Even small monthly contributions add up over time. The key is consistency and discipline.

Diversify Income Streams

  • Don’t rely on just one source. Consider Social Security, retirement savings, potential rental income, or part-time work in retirement.

Prepare for Inflation

  • Social Security does adjust for inflation, but it may not keep up fully with rising costs. A mix of stocks and other inflation-sensitive investments can help maintain purchasing power.

What to Watch Moving Forward

It helps to stay informed:

  • Track new legislation around retirement reform.
  • Follow annual updates from the Social Security Trustees.
  • Pay attention to changes in cost-of-living adjustments (COLAs).

But no matter what politicians do or don’t decide, one thing is clear: personal savings will always matter.

Social Security — FAQs

What policy options have been discussed to address future shortfalls?
Options mentioned include increasing payroll tax rates, adjusting retirement ages, or reducing benefits for higher earners.
How does inflation affect Social Security payments?
Benefits include annual cost-of-living adjustments, but these increases may not always keep pace with actual inflation.
Who is likely to be most affected by potential reductions?
Younger workers, such as those in their 20s, 30s, and 40s, may be more directly impacted if reforms are delayed.
How often are solvency projections updated?
The Social Security Trustees release updated projections each year in their annual report.
What role do personal savings play alongside Social Security?
Because benefits may be reduced in the future, the article notes that personal savings could become more important in retirement planning.
Why is early action on reform considered important?
Acting sooner may allow for smaller adjustments, while delaying increases the size of changes needed to close the funding gap.
Why is Social Security facing funding pressure?
Longer life expectancy and fewer workers per retiree mean the system is paying more in benefits than it collects in taxes.
When are Social Security trust funds projected to run out?
The 2024 Trustees Report projects the combined trust funds could be depleted by 2035.