If you’ve ever checked your Social Security benefits estimate and wondered if you’ll actually receive a check when you retire or an email from the government wishing you luck when you return to the workforce instead, you’re in good company. Social Security could look very different within 10 years if lawmakers don’t address the program’s long-term funding challenges.
According to certified valuation analyst Joe Braier, CEO and president of Lake Country Advisors, “Lawmakers have an incentive to protect current retirees and those approaching retirement due to the lack of time these individuals have to absorb legislative changes. Future retirees have longer periods of time in which to make adjustments and may bear some of the burden through slower increases in benefits, increased eligibility ages or higher taxes.”
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Economists aren’t predicting benefits will disappear, but the projections have fueled years of debate over retirement security and the future of Social Security payments. In other words, America has spent the last decade treating Social Security like a car making increasingly alarming noises while insisting it’ll probably make it to the next exit.
Here is some expert insight into what Social Security could look like in 2035.
Trust Fund Outlook: Worst Case Scenario Is Benefits Get Cut
If you plan to rely on the program in 2035, keep in mind there’s a chance you could receive less in benefits than you might have expected. If no changes are made to deal with the trust fund shortfall, benefits will have to be reduced — possibly by 25%.
However, according to Braier, “Social Security will continue to collect payroll taxes once it has exhausted its reserves; therefore, the Social Security Trust Fund will not be eliminated. According to the 2026 Trustees Report, the trust fund for retirement will pay all scheduled retirement benefits until the end of the fourth quarter of 2032.”
So the timeline could seemingly be escalated even more. Braier continued, “After this date, there will be sufficient income to cover approximately 78% of the scheduled retirement benefits. In total, when combining both the disability trust fund and the retirement trust fund, there will be sufficient income to cover all scheduled benefits until the third quarter of 2034. After this date, there will be sufficient income to cover approximately 83% of scheduled benefits.”
For many retired adults, that kind of benefit cut would be a big financial hit. Social Security provides at least half of the income for 50% of elderly married couples and 70% of elderly single people, according to the Social Security Administration (SSA).
Is It Likely That Benefits Will Be Cut?
There is no way around the fact that a change that will surely ruffle some feathers is forthcoming. Though there have been no home run suggestions yet, it’s clear that there is no way to make everyone happy.
For Gen Z or millennials that are years away from retirement, Braier said, “Younger workers should plan using neither full nor no Social Security benefits as their assumptions. Instead, a more thoughtful approach is to use Social Security as a reduced income floor and build retirement plans based upon the amount of additional retirement income needed. This allows younger workers to build a nest egg that protects them from potential changes in Social Security legislation while also recognizing the fact that Social Security continues to receive significant amounts of tax revenue.”
Many experts think Congress will step in before 2035 to prevent such a deep cut in benefits. Policymakers seem to agree that something needs to be done, but they disagree on how. Proposed bipartisan solutions include everything from tax increases to benefit adjustments that will automatically be formulated based on life expectancy.
Possible Legislative Ways To Balance Social Security’s Budget
“Congress can choose to modify or increase the taxable earnings cap, increase payroll contributions, change the formulas used to calculate benefits or incrementally increase the age at which a worker becomes eligible to retire,” said Braier. “However, if Congress waits too long before taking action, many options become limited since they would require more significant changes during a shorter period of time.”
Simply put, even though Social Security isn’t expected to run out of money for a few years, several options for changes have already been floated to deal with the budget shortfall. These include:
Raising the payroll tax rate
Increasing the wages subject to Social Security taxes
Raising the full retirement age (FRA)
Reducing the annual cost-of-living adjustments (COLA)
Cameron Huddleston, Joel Anderson, Michael Keenan and Gabrielle Olya contributed to the reporting for this article.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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