Millions of Americans worry that Social Security won’t be there when they retire. The Social Security trust funds are projected to run short of reserves in the coming years. If Congress doesn’t act before then, incoming revenue could cover only about 78% of scheduled benefits, effectively resulting in benefits about 22% below scheduled levels.
That sounds alarming. A retiree expecting a $2,500 check as part of their retirement
plan, for example, could see only about $1,950 instead. That’s a difference
of $550 a month or $6,600 a year, which could go a long way for seniors on fixed
income.
While it’s reasonable to pay attention to Social Security’s future, the cut that
many Americans are bracing for may not be the biggest retirement threat. Here’s
the biggest risk.
Why Social Security is under pressure
Social Security is a pay-as-you-go system, meaning today’s workers pay payroll
taxes to fund today’s retirees’ benefits. The problem is that the ratio has
changed radically over the decades.
In 1945, nearly 42 workers’ payroll taxes covered one person collecting
benefits, according to Social Security Administration data. Today, the ratio has
fallen to about 2.6 workers per beneficiary as Americans are living longer,
having fewer children, and spending more years in retirement.
There are fewer workers for each retiree, putting increasing pressure on the
program’s finances. That demographic shift is the main reason Social Security
could have long-term funding challenges.
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This is a projected cut, not a done deal
This is not an enacted cut in benefits. That’s the estimated funding shortfall
if Congress fails to act. There are a number of levers that Congress could pull
to change the outcome.
Congress can shore up Social Security by raising the payroll tax, raising the
taxable wage cap, adjusting benefits, or combining several reforms.
Historically, lawmakers have stepped in before the program reached insolvency.
While the Social Security cut is real and worth preparing for, it might never
fully materialize as it presently appears in projections. That uncertainty is
part of the reason it shouldn’t be the only thing keeping you up at night.
Why undersaving may be the bigger threat
Even if the full 22% cut actually happens as projected, it probably wouldn’t be
the biggest threat to most people’s retirement. The real threat is that many
people are undersaving for retirement.
According to a retirement confidence survey conducted by the Employee Benefit
Research Institute and Greenwald Research, the percentage of Americans who feel
confident they will have enough money to live comfortably in retirement fell to
64%. The future of Social Security and Medicare benefits, the rising cost of
living, and debt are some of the major concerns cited by the respondents.
A new report from the National Institute on Retirement Security also found that American workers ages 21 to 64 have less than $1,000 saved for retirement. That could pose an even more immediate retirement risk than a potential future Social Security cut.
This is because Social Security was never meant to be your only retirement plan.
It was built as a supplement, not a replacement for personal savings. The
average Social Security retirement benefit as of June 2026 is about $2,084 a
month, or about $25,000 a year. That alone isn’t enough to cover the typical
retirement expenses for most households.
Even generous benefits may not be enough
Consider someone who has done better than average. Say, for example, they
receive $3,500 a month in Social Security, or $42,000 annually, well above the
average retirement benefit.
Assume they retire with a $500,000 nest egg. Using the 4% withdrawal rule, that
could mean an additional $20,000 in retirement income.
Combined, that’s $62,000 annually. And that’s before
considering inflation, rising health care costs, unexpected expenses, or the
possibility of living well into your 90s. Whether that’s enough depends on the household’s pre-retirement income, expenses, lifestyle, and other sources of retirement income.
Bottom line
No single individual can dictate what Congress will do on Social Security
benefits once the reserves run out. But you have control over almost everything
else in your retirement
plan.
If you’re falling behind on savings, increasing contributions to a workplace
retirement plan or IRA, even by a small percentage, can make a meaningful
difference over time thanks to compound growth. Paying off high-interest debt
and investing raises or bonuses instead of spending them can also help you
accelerate progress.
You may also want to consider working an extra two or three years as you
approach retirement. This way, you’ll have more years to save, fewer years for
your portfolio to support you, and perhaps larger Social Security benefits if
you delay claiming.
The sooner you start ramping up your savings, the more prepared you’ll be
regardless of what happens to Social Security.
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Author Details
Chris Lewis, CEPF
Chris Lewis has spent his career turning data into answers. As the Head of Research at FinanceBuzz and a Certified Educator in Personal Finance, he oversees the data journalism and media relations teams, digging into the personal finance topics that shape Americans’ lives at every stage, from Social Security and retirement income to 401(k) strategies, jobs, and real estate.
