What Will Social Security Look Like When You Retire?

Don't rely on it as the chief way to feather your nest

What will Social Security look like when you retire? Many Americans have lost hope that there will be much left to see. According to a 2022 Gallup poll, 40% of those surveyed said they worry about the Social Security system a great deal, while 31% said they worry about it a fair amount. Among those not yet retired, 33% were still counting on Social Security to be a major source of retirement income.

So what will Social Security realistically look like in the future? Should workers be concerned?

Key Takeaways

  • Social Security does not provide enough income for a comfortable retirement, nor is it likely to do so in the future.
  • Without a legislative fix Social Security trust funds are expected to deplete their reserves by 2035, when the projected tax receipts will cover only 80% of scheduled benefits.
  • The burden of restoring Social Security to long-term solvency may fall disproportionately on younger and higher-income workers.
  • Start saving for retirement as early as possible by contributing to a 401(k) plan or an individual retirement account (IRA).

The Future of Social Security

Social Security may look drastically different in the next few decades, especially since the Social Security Administration's 2022 Trustees Report estimates the Social Security trust funds will be depleted in 2035. At that point, the system will have no cash reserves, while projected receipts will be covering 80% of scheduled benefits. However, this is a modest improvement from the 2021 Trustees Report, due to a stronger-than-expected economic recovery after the COVID-19 recession.

Social Security's surplus of more than $2.8 trillion as of Q1 2022 is the result of decades of contributions from the huge Baby Boomer generation. As the boomers retire they are causing benefit outlays to swell, while leaving fewer payroll tax contributors to support each beneficiary.


The proportion of the long-term Social Security shortfall that would be addressed by the repeal of the cap on annual income subject to Social Security taxes with no corresponding increase in benefits for high-income taxpayers, according to the Social Security Administration.

Changes must be made. Many have been proposed, and the Social Security Administration regularly releases estimates of the effect of the various legislative proposals on the balances of the Social Security trust funds.

Polling shows the majority of Americans favor eliminating the income cap on Social Security taxes, and means-testing benefits.

What Social Security looks like after 2035 will be determined by Congress rather than opinion polls, however. In the past, lawmakers have opted to increase payroll tax rates and, much less frequently, to raise the age of eligibility for benefits, in order to ensure the program's solvency.

The age of eligibility for full benefits was increased from 65 to 67 for those born in 1960 or later under program changes passed by Congress in 1983. Meanwhile, the Social Security tax rate has increased from 1% originally to 6.2% since 1990.

Who Will Be Affected Most?

Social Security benefits keep 18 million Americans 65 and older out of poverty. The 20% reduction in benefits that would be required to balance outlays with receipts from 2035 would hit hardest those just above the poverty line, as well as the 9.5% of Social Security recipients older than 65 already living in poverty.

The Social Security Administration projects the poverty rate for beneficiaries age 60 and older would leap from 4.5% in 2034 to 7.4% in 2035 as a result of such a cut to benefits.

Of course, all future beneficiaries would face the cuts, while younger and higher-income workers in particular could end up paying higher taxes as part of a solution.

Social Security Is Not Enough for Retirement

Even if Social Security gets a huge makeover from Congress, workers should not consider the program a sufficient retirement plan. Even now, Social Security barely covers living expenses for recipients.

According to the Social Security Administration, Social Security benefit payments to 65 million recipients totaled $1.14 trillion in 2021. This might seem like a lot, but break down those numbers: in 2021, retirees received $1,669 per month, on average, and disabled workers $1,362 per month. That's not far above the official poverty line, which was roughly $1,132 a month for a single person in 2022.

If you are planning to retire in the next decade, it is important to use the time you have left wisely. Boost your retirement savings as much as possible while paying down debt and keeping spending low. Social Security payments alone will not cover a typical mortgage or living expenses when you are saddled with debt.

Secure Retirement, Your Way

So what can someone do when retirement is 20, 30, or even 40 years away? The best plan is to start saving now. Take advantage of the time you have and save as much as you can in your 401(k) or individual retirement accounts (IRAs), traditional or Roth.

The typical 401(k) plan automatically deducts your pre-tax contribution from gross earnings in each paycheck, reducing taxable income for the year. 401(k) plans also defer taxes on the accumulated gains until the money is withdrawn.

Be sure to contribute enough to get your employer’s full match, even if it is a small percentage. Otherwise, you’re passing up free money. Even if your company does not match contributions, 401(k) plans are a good deal. You get a tax break on the contribution, your funds grow on a tax-deferred basis, and you'll be able to deposit much more than you can in an IRA.

IRA Contribution Limits

The maximum amount that you can contribute annually to any combination of traditional IRA and Roth IRAs is $6,000 in 2022 (rising to $6,500 in 2023). Those age 50 and older can contribute an additional $1,000 as a catch-up contribution in both 2022 and 2023. Meanwhile, the maximum 401(k) contribution is $20,500 for 2022 (rising to $22,500 in 2023). Those 50 or older can contribute an additional $6,500 (rising to $7,500 in 2023).

Roth IRA Income Limits

Contributions to Roth IRAs are limited and can be phased out, depending on how much income you earn and your tax filing status.

The income phase-out range for single filers is $129,000 to $144,000 for 2022 (rising to a range of between $138,000 and $153,000 in 2023). For married couples filing jointly, the income phase-out range is $204,000 to $214,000 (rising to a range of between $218,000 and $228,000). So if a married couple earns more than $214,000 in 2022 (or $228,000 in 2023), they can't contribute to a Roth.

Start Early

As early as your 20s, you should make every effort to start saving for retirement—even if you feel you cannot afford it or you’re not in your dream job. If possible, have retirement savings deducted automatically from your paycheck. This way, you won’t miss the money.

Another strategy is to learn to live off of 98% of your paycheck and invest the other 2%, then gradually increase the percentage each month while cutting back on spending.

The Bottom Line

Many people worry about whether Social Security will be available when they retire. Although it's unlikely that Congress will leave the system relying solely on incoming receipts to pay reduced benefits, the solutions could include cost-saving measures such as delaying the age of benefit eligibility or means tests. Everyone who can should build their own retirement savings and not plan to rely on Social Security benefits as the chief source of retirement income. That's not a good idea now and won't get any better in the future.

Article Sources
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