- At Globe Live Media we explain to you if Social Security benefits can really be exhausted one day in the US or if it is about rumors without economic foundation
Social Security benefits in the US represent an essential form of income for millions of retirees in the country. To sample, a button: at least 50 million retired workers collected benefits from this federal program in 2020, according to data from the Social Security Administration (SSA). For this reason, the rumors that a possible recession would cause Social Security benefits to run out have set off the alarms of more than one person.
In fact, a survey carried out by The New York Times indicated that one of the great current concerns of Americans is that: the uncertainty of knowing if Social Security benefits can really be exhausted one day in the United States.
Some of this concern was exacerbated by the release of the 2021 Social Security Trustees Report, which determined that by 2034 retirees will only receive 78% of their full benefits from this program if Congress it did not allocate new funds to it.
But to know why this is happening, or whether Social Security benefits may one day run out, you need to know how Social Security works.
How does Social Security work and why might you run into funding problems in the future?
To begin, it is useful to explain how the financing of Social Security works. This federal program is funded through payroll tax breaks for US workers.
This means that Social Security withholds a portion of the paychecks of employees and employers who earn up to $147,000 a year.
When workers pay their Social Security taxes (which is 6.2%), these resources are not assigned to a particular account, but are used to pay the benefits of all current retirees.
According to the Social Security Administration, for every dollar you pay in Social Security tax, 85 cents goes toward the Social Security fund that pays monthly benefits for retirees and their families (as well as surviving members of workers who have died). The other 15 cents goes into another fund that pays benefits for people with disabilities and their families.
However, in the next 10 years, Social Security will take money from its own reserves because the number of workers will decrease while the number of beneficiaries will increase. According to a CNBC report, this is due to the decline in the birth rate that was recorded after the period known as the “baby boom” between the years 1946 and 1964.