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No. Social Security is not Bankrupt!

April 05, 2024

Social Security, a cornerstone of America's social safety net, has long been a subject of concern and debate. One persistent myth is that Social Security is on the brink of bankruptcy. However, this assertion is not only misleading but also fundamentally incorrect. Let's delve into the history and facts surrounding Social Security to understand why it remains a sustainable and vital program for millions of Americans.

Understanding Social Security's Foundation

Social Security was established in 1935 as a response to the economic hardships of the Great Depression. It was designed as a social insurance program to provide financial support to retirees, disabled individuals, and survivors of deceased workers. The program operates on a "pay-as-you-go" basis, meaning that current workers' payroll taxes fund benefits for current retirees.

The Truth About Social Security's Finances

Contrary to popular belief, Social Security is not bankrupt or on the verge of collapse. While it faces financial challenges, projections indicate that the program can continue to pay full benefits for several decades without any changes. According to the latest Social Security Trustees Report, the program's combined trust funds are projected to be depleted by 2034. However, even if this were to happen, Social Security could still pay approximately 79% of scheduled benefits through payroll tax contributions.

Social Security benefits will remain funded as long as workers continue to pay payroll taxes. This is due to the nature of Social Security as a "pay as you go" program, where today's benefits are primarily sustained by the payroll taxes contributed by today's workforce. The system generated over $1 trillion in revenue in the past year, approximately equivalent to the amount disbursed in benefits.

Social Security Benefits Going Forward

While we may see future adjustments to the program funding and distribution in the future, we can count on the continued distribution of social security benefits upon retirement. It's important to note that opting into Social Security benefits "early" out of fear of losing benefits is not advised. Not only does this not affect your total benefits amount, it can be detrimental to your overall long-term benefits.

It's essential to debunk the myth that Social Security is bankrupt to avoid unnecessary panic and misinformation. While the program does face financial challenges, it remains a vital source of income for millions of retirees, disabled individuals, and survivors. By understanding the facts and history behind Social Security, we can work towards implementing responsible policy solutions to ensure its sustainability for generations to come.

We know Social Security can be a confusing program. If you have any questions, please don't hesitate to reach out, and we can discuss them in more detail.