There is a widespread assumption, among many Americans, that the Social Security program consists of a specific pool of money, which will “run out” at some specific time. In particular, this mindset was very prevalent in the George W. Bush years, when Al Gore famously promised to put Social Security “in a lockbox,” while Bush made a failed attempt in his second term to partially privatize the program.
However, it doesn’t quite work that way.
According to CNBC, which cited financial services company Nationwide, a recent survey says that 71 percent of Americans fear that Social Security will run out of money in their lifetimes. And the pandemic has made those numbers worse.
That 71 percent number has an interesting generational breakdown. Gen Xers believe Social Security will run out at a clip of 83 percent However, millennials, believe that number at 77 percent, while just 61 percent of baby boomers think so, which may be because they’re older and “their lifetime” is a shorter time.
In reality, it’s unlikely that Social Security will ever actually run out of money.
Social Security really does have trust funds from which it pays out its benefits, and the Social Security Administration indicated in April of 2020 that those funds could run out in 2035.
However, that doesn’t mean those reaching retirement age around that time won’t get benefits.
“Many people hear the words insolvent or bankrupt and they automatically assume the program is just going to disappear,” Shai Akabas, director of economic policy at the Bipartisan Policy Center, told CNBC. “In reality, Social Security has been around for well over 80 years now and it has more support than just about any other government function… It is highly unlikely that it is going to disappear anytime soon.”
That’s because Congress can simply adjust how those funds work, in order to ensure there remains enough money to pay out those benefits. Congress has acted to make fixes to Social Security in the past, most notably during Ronald Reagan’s first time, as The Brookings Institution pointed out.
Social Security, after all, is a very popular program, and it would be politically problematic for a president or Congress to let it go away.
Due to recent inflation, Social Security beneficiaries are likely to get a cost-of-living raise in their benefits next year.
How are those benefits calculated?
“Social Security benefits are calculated by combining your 35 highest-paid years (if you worked for more than 35 years). First, all wages are indexed to account for inflation. Wages from previous years are multiplied by a factor based on the years in which each salary was earned and the year in which the claimant reaches age 60,” per Investopedia.
“This calculation gives an amount comparable to buying power based on the current value of the dollar. Accounting for this valuation change is important because a salary of $14,000 was far more impressive in 1954 than it is today.”
Stephen Silver, a technology writer for The National Interest, is a journalist, essayist and film critic, who is also a contributor to The Philadelphia Inquirer, Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.