Family Wealth blog

Social Security's Shaky Future

The title Social Security's Shaky Future is at the upper right of a scary wooden footbridge over a river

With approximately 94% of American workers covered by Social Security and 65 million people currently receiving benefits, keeping Social Security healthy is a major concern. The good news is that Social Security isn’t in imminent danger of going broke. In fact, the most recent report from the Trustees of the Social Security Trust Funds, released on June 2, shows that the effects of the pandemic were not as significant as projected in last year’s report [1]. The bad news is that the underlying structure of the system—current payroll taxes paying for current and future retirees—doesn’t add up so well. So, Social Security’s financial health is declining, and benefits may eventually be reduced unless Congress acts.

In its latest report, the Trustees estimate that Social Security will have funds to pay full retirement and survivor benefits until 2034. At that point, reserves will be used up, and payroll tax revenue alone would be enough to pay only 77% of scheduled OASI benefits. The Disability Insurance Trust Fund, on the other hand, is projected to pay full benefits through the end of 2035 [2].

By the way, applications for disability benefits have been declining substantially since 2010, and the number of workers receiving disability benefits has been falling since 2014, a trend that continues to affect the long-term outlook.

The projections above are based on current conditions and best estimates of likely future demographic, economic, and program-specific conditions. The Trustees acknowledge that the course of the pandemic and future events may also affect Social Security’s financial status.

Room for Improvement?

The Trustees continue to urge Congress to address the financial challenges facing these programs, and many options have been proposed. Briefly, here’s a short list of approaches that could contribute to a solution:

  • Raise the current Social Security payroll tax rate
  • Raise or eliminate the ceiling on wages subject to Social Security payroll taxes
  • Raise the full retirement age beyond the currently scheduled age of 67
  • Raise the early retirement age beyond the current age of 62

(As you can see, there’s a whole lot of raising being proposed!)

Other suggestions include:

  • Reducing future benefits by up to 20.3% or even up to about 24.1%, depending on whose accounts would be affected
  • Changing the benefit formula that is used to calculate benefits
  • Calculating the annual cost-of-living adjustment (COLA) for benefits differently

Supersized COLA, anyone?

Speaking of COLA, the Cost of Living Adjustment (COLA) is an aspect of Social Security payments that attempts to shield retirement checks from inflation. As inflation rates have been significantly higher than in the past, this year’s COLA should be larger than usual. And it is. The Senior Citizens League, a nonprofit group that advocates for benefits for seniors, is projecting an 8.9% annual increase for 2023 [3]. This would represent the biggest boost in monthly checks since 1981.

The Takeaway

Your financial planning for retirement should take any projections about Social Security income with a large grain of salt. While today’s average retirement lasts thirty years, even constant COLA increases would be unlikely to cover increasing medical costs and the like. It’s better to take a well-rounded approach to investing and retirement planning that considers Social Security as a factor, but not an essential one. Your financial advisor will be able to help with this type of long-term planning.


[1] Social Security Administration, 2022



Disclosure: This information is for educational and informative purposes and shall not be considered a specific recommendation. Readers are advised to speak with their advisor at JL Bainbridge to determine their specific recommendations that meet their investment objectives and to review their portfolios. The material being provided is thought to be accurate. However, the information is compiled from multiple resources and may become outdated or otherwise rendered incorrect by new research or corrections without notice. J.L. Bainbridge & Co., Inc., is not a broker dealer and does not offer tax or legal advice. Please consult your tax or legal advisor for assistance regarding your individual situation. It should neither be assumed that future results will be as profitable or that a loss could not be incurred. For more information related to our firm, please see our disclosure brochures at and

The Family Wealth newsletter logo, which is a forest green square with white letters on it.

Are you already a subscriber? If not, click here so you don't miss anything!