Social Security is the financial foundation for many of our seniors, so when there is troubling news about the program, it is alarming for many people.
Some of that news came recently when forecasted projections showed that in 2022, for the first time in history, benefits paid will be greater than revenue collected. That reversal of benefits versus revenue is expected to continue and grow in future years.
There are a number of reasons for this. The most significant is the growing number of baby boomers starting to retire. The number of workers replacing them is simply not enough to counteract the benefits versus revenue ratio.
Additionally, life expectancy is longer than it was when Social Security was created in 1935. In fact, since 1960 alone, life expectancy has risen nine years.
So while all this is not good news, it may not be as bad as you think. Social Security is funded through payroll tax, interest income on asset reserves and the taxation of Social Security benefits, with payroll taxes providing the largest portion. So as long as people keep working, the program will continue to have revenue. But with less revenue and more benefits to pay, there may be a time in the not-too-distant future when there will be benefit cuts.
This news should give people pause. During times when some politicians are already calling for cuts in Social Security for reasons that do not necessarily deal with financial projections, it’s important for Americans to stay vigilant about protecting the program.