What do I do when Social Security runs out?

Word on the street is that Social Security is running out. What should you do? Is it time to panic yet? In this blog we’ll discuss what it may mean for those who are about to retire, are already retired, or even may be decades away.

What is the Social Security Trust Fund?

Remember those Social Security taxes that were taken out of your paycheck?

You remember that thing called FICA, right? That’s how Medicare and Social Security are funded by taxpayers like you. A little over 6% of your gross wages goes to the Social Security trust fund, which is held by the US Treasury. When you retire, you’ll receive your retirement benefits from this trust fund.

Is that the only thing the Social Security Trust Fund does?


It also pays retirement benefits to the surviving spouses of the deceased people who are receiving Social Security, as well as disability benefits. And now…for the important question:

Is the Social Security Trust fund going broke?


The way it works is this. The Trust Fund takes those payroll taxes they swiped from your paycheck, and uses it to pay out benefits in any given year. If there is a surplus, they invest it into Treasury bonds earning interest so they have more to pay out for future benefits.

But there’s a little issue.

With so many people living longer and birth rates declining, there’s not enough money to cover all the benefits. Starting in 2035, according to the Social Security Administration itself, “taxes will be enough to pay for only 75% of scheduled benefits.”

So to answer the question of whether or not the Trust Fund is going broke – not technically, and not completely.

The bottom line is, I wouldn’t rely on it for your retirement. If they are already reducing benefits, and we can only presume that things will get worse, it’s not prudent to trust this as a source of reliable income. It would be best to shore up other resources.

What does it mean for retirees?

There’s no silver bullet, but for those looking to retire after 2035 (or even earlier, for that matter), we’d offer this guidance.

  • Create a financial plan now, and map out how much after-tax cash flow you’ll need to support your living expenses. Make sure to include all available sources of income, from 401(k) distributions to annuities and proceeds of your investment portfolio. If there is a shortfall, come up with a plan to fix it. This is called a retirement income plan.
  • Make sure you aren’t overestimating what your savings looks like after taxes. A Traditional IRA, for example, has contributions that were made with before-tax dollars, and so all distributions will be made on an after-tax basis. Assuming a $500,000 balance in a pre-tax vehicle will actually mean you have $500,000 to spend is wrong.
  • If you are counting on Social Security as a significant portion of your retirement savings, use conservative estimates. Benefits are already being reduced and we can never be sure how the trajectory will go. Don’t be optimistic in your financial plan when calculating the amount that you anticipate getting from an already insolvent entity like the Trust Fund.
  • Get a record of your Social Security earnings by visiting this website. It’s possible that they may have botched the records – set it straight way in advance by checking now and notifying them of an errors.
  • Establish savings goals. Even if you are discouraged by how much you’ve been able to save in the past, it’s never too late to begin improving the trend. Start today!
  • One easy way to save more is to start contributing to your company’s 401(k) or other employer-sponsored retirement vehicles. Try to maximize the employer’s matching contribution, if they are making them.
  • If you are 50 or older, you may be eligible for catch-up contributions to your retirement plans.

Don’t panic!

The key takeaway here is not to panic. Figure out if you are on track, and if you aren’t, there is a litany of things you can do. But whatever you do – don’t depend on the Social Security Trust fund because it’s running out!

If you are retiring in Sparta, New Jersey or any other location and would like to discuss how we can help, please set up a time to meet.


Goss, Stephen C. Social Security Bulletin, Vol. 70, No. 3, 2010. The Future Financial Status of the Social Security Program. https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html