Will I Get Social Security If the Trust Fund Goes Bankrupt?

News reports imply that the Social Security trust fund is going broke. Should you include Social Security income in your retirement planning?

The latest trustees report projections from Social Security indicated that the trust fund will be depleted by 2035. After depleting the fund, it can still pay about 83% of the scheduled benefits.

What does that mean? How can it still pay 83% of the benefits if the trust fund has gone bankrupt?

Let’s explore how the Social Security Administration can deliver even when it runs out of money.

What Happens if the Social Security Trust Fund is Depleted?

This has been the headlines. Most people think that if the trust fund runs out, millions of retirees will stop receiving their Social Security Payments. This is not true.

Although the updated Social Security Trustees projections estimate that the trust fund’s reserves could be depleted as early as 2035, most Social Security payments are backed by current payroll taxes. That’s why even if the trust fund is depleted, it can still pay 83% of the full benefit.  

Should I Include Social Security Benefits In My Retirement Plan?

As a financial planner, I get these questions all the time. The most conservative clients do not want to include the Social Security program when they plan for retirement. However, after we reviewed what the trust fund is and how the benefits are funded by current tax revenue, the next question I get is how much we can count on and if benefit cuts may be expected over the years. Before I answer their question, I would propose a question instead:

Who do you think is the biggest population count by generation? Baby Boomers, Generation X, Millennials, or others?

Most often, the response is “The Baby Boomers”. Is that your response as well? If so, you are wrong!

The biggest population by generation count is the Millennials, who are between the ages of 43 and 28. This generation was hit hard by the financial crisis and COVID-19, so their earning potential suffered. However, as more boomers retire, they are getting better jobs with higher incomes and pay more Social Security Taxes. 

What about the second biggest population count by generation?

This has to be the Baby Boomers, right? Wrong again. The second biggest population count by generation is Generation Z, between the ages of 27 and 12. They are just starting their adult lives. As more Gen Zers enter the workforce, they will only increase Social Security payroll taxes and ensure that benefits are paid even after the trust fund’s depletion.

Population growth certainly does not guarantee that Social Security will not run out of money in the future. However, it does indicate that including it in retirement income planning is reasonable. So, if you want to plan on the more cautious side, I would suggest you consider receiving 70% of the benefit payments. 

Will Social Security Solvency Be Resolved?

This cannot be done without Congress acting. In fact, they already increased the taxable wage base, so higher income earners are paying more Social Security Tax.

Second, the recent interest rate increases also mean the trust fund has earned better returns. These two are the biggest reasons the depletion date has been pushed back to 2035. Also, with the prospect of additional workers, the current benefits paid to beneficiaries have increased from 75% in 2010 to 83% in 2024. 

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About the Author

David Fei is the co-founder of PlanWell Financial Planning. He specializes in guiding federal employees toward a confident retirement nationwide. PlanWell’s mission is to empower Feds when making retirement decisions, ensuring their benefit choices align with their retirement aspirations. Sign up for our no-cost Federal Retirement Webinar or contact him for a confidential review.