When Will Social Security Run Out?

There’s been much talk about the possibility of Social Security running out completely and leaving future retirees in the lurch. In reality, it’s very unlikely that the program would run out of money and shut down entirely

But it is possible that the amount of benefits you receive from Social Security after retirement may not meet your expectations. That’s because without changes, the Social Security system is expected to deplete its existing reserves, leaving workers with a potential benefits shortfall

But it is possible that the amount of benefits you receive from Social Security after retirement may not meet your expectations. That’s because without changes, the Social Security system is expected to deplete its existing reserves, leaving workers with a potential benefits shortfall

How Social Security Works

The American Association for Retired Persons (AARP) describes Social Security as a “pay-as-you-go” system  , meaning that the contributions made by workers today are used to pay the benefits of retirees. When today’s workers retire, they’ll receive benefits based on what the next generation contributes. Any money that’s left over goes into one of two trust funds.

How Income Matters in Social Security

The amount each individual worker contributes to Social Security depends on their income. Employees who work for a traditional employer split the Social Security tax payment with their employer at 6.2% each and self-employed workers are responsible for the entire 12.4%.

What Is the Age Eligibility for Social Security?

Those employees become eligible for benefits when they reach 40 credits, which equals roughly 10 years, or full retirement age. For Americans born in 1960 or later, that’s 67 years old.

Risk of Social Security Running Out

Myth 1: There won’t be any money to pay benefits

The odds of Social Security running out of money completely are low. Remember, Social Security is pay as you go with today’s workers paying in funds that are used to provide retirement benefits for today’s retirees.

Reality: Social Security surplus funds may be exhausted

While workers pay into Social Security, the program also has a surplus of trust funds that it can use to pay benefits, as described earlier. The program is scheduled to begin using those funds to pay some benefits in 2021, with payroll taxes continuing to pay the majority of benefits to retirees.

Myth: People who aren’t eligible for Social Security can receive it

The idea is that those people might unfairly claim benefits they’re not entitled to, putting a burden on the system and reducing benefits for eligible workers.

Reality: Documentation is required to obtain benefits

A Social Security number or Individual Taxpayer Identification Number is required for the Social Security Administration to create a benefits record for a citizen or non-citizen who’s authorized to work in the U.S. Someone who has either could legally obtain benefits through Social Security since they’ve technically paid into the system.

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