Is the US running out of Social Security?

Social Security’s in trouble.

The program is quickly running out of cash.

Millennials and younger don't believe that

they're going to see a penny of Social Security.

As a millennial, this has been my introduction

to Social Security.

It's like the government pulls some money from my paycheck

and then it goes into some imaginary fund

that maybe I'll never see again.

The truth is, I know embarrassingly little about this program

that most Americans rely on for retirement.

Before you go and dive into the comments, it seems

nobody gets it.

This poll looked at people near the retirement age

who are about to start collecting it.

But rather than succumb to the void like I want to,

I read entirely too much about it so you don't have to.

So what is Social Security and is it actually doomed?

It's really hard to

overstate how important Social Security is.

The official name of Social Security is “The

Old-Age, Survivors, and Disability Insurance Program.”

It can kind of be broken down into three parts.

Most people are familiar with the old-age one.

That's retirement.

It's the biggest source of income for most retirees.

See the chart?

Actually. Here's an updated one.

In 2022,

this program alone was responsible for keeping nearly 16

and a half million older Americans above the poverty line.

But it's also so important for families.

It supports people when a parent or a spouse dies,

you know, when they're still of

working age, it supports people if they become disabled

and are not able to continue

working and supporting their families.

Thus, the name.

Every U.S.

worker pays into social Security via a payroll tax.

Well over 90% of American workers

just pay 6.2% of their wages

out of every paycheck into Social Security,

and then their employers pay another 6.2%.

There is a cap on this tax,

though, as in if you make more than a certain amount of money,

the government's only going to tax a portion of it

for Social Security.

The cap this year is $168,600.

Still with me?

Or you sinking into the void of financial lingo?

Come back.

We're almost there.

Now, you can literally look at your pay stub

and see where the Social Security tax comes out.

This money goes into two trust funds

managed by the federal government

and is then used to pay out the people

who are currently collecting

typically in the form of monthly checks.

When you retire

the size of that check is determined by the average

of how much you've made throughout your working life ...

and the age you start to collect.

As of now, retirees can start collecting at age 62,

but they won't max out the benefit unless they wait

until they're 70.

So to recap, current workers pour money into trust funds,

and those trust funds are used to pay out

current beneficiaries.

As long as people are working.

This tax is being paid

and there will always be money in those funds.

So why does everybody keep saying it's being drained?

So the reason that Social Security

faces a long term financing shortfall

is the aging of the population.

In other words, boomers.

Here's a chart of the US population.

As you can see, there's a bump here.

That's the baby boomer generation.

For decades, this giant population

was the main workforce that paid into Social Security.

That means more people

were putting money in than taking money out.

So those trust funds that we talked about earlier

had a surplus,

and the US Treasury took that extra money and invested it.

And those investments ultimately

gave us a $2.9 trillion dollar reserve.

Then came 2021.

At this point, Social Security stopped operating in a surplus

and actually fell into a deficit

because more and more people started to collect.

We just don't have quite as many workers

supporting each beneficiary as we used to.

But it's fine right now

because 2.9 trillion is a nice pile of money

that's been supplementing the shortfall.

So every Social Security check

a beneficiary gets right now

is kind of made up of two things.

About 80% of that is the trust funds

that are being filled by everyone still working.

And about 20% is coming from that $2.9 trillion surplus.

And that surplus is what's predicted to run out by 2033.

And then after that point, about ten years from now,

there is some uncertainty about what will happen.

What won't happen is a total draining of Social Security.

There will always be benefits in some form.

It may look different

from the Social Security benefits that are paid now,

but there's really no question of whether Social Security

benefits will be paid for into the future.

What those benefits

look like entirely depends on

how Congress decides to restructure the program

to get over this baby boomer conundrum.

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Back to the video.

So there are a few options for restructuring the program.

Let's talk about the top five in a very bland

and unbiased way.

Starting with the high earners.

A lot of very wealthy people,

they don't get their money through salaries

like I make more in a salary

than Jeff Bezos does, for example.

And so he pays less in Social Security than I do.

Thanks, Jeff.

At least one bill is fighting

to add a Social Security tax to high investment income,

which is where a lot of rich people make and keep their money.

Then there's this.

We could remove or change that $168,000 salary cap.

The most popular option is to change the payroll tax cap,

either to get rid of it altogether

or to raise it so that it covers

more of high wage people's earnings.

These next two send people into a rage,

but they are kind of the most obvious.

Raising the payroll tax would immediately

start pumping more money into Social Security

and help offset the imbalance of beneficiaries and workers.

And cutting the amount

each person can actually receive

would balance the scales, even further.

But this is wildly unpopular across

party lines and with the public.

Granted, if Congress were to do nothing in

2033, benefits would automatically decrease.

And this option.

You've probably heard this before.

It did not go over well in France.

Raising the full retirement

age is a benefit cut.

Full stop. For everybody.

It means 7% lower benefits over a lifetime on average

for each year that you raise the retirement age.

It's hard to predict exactly what Congress will do,

but it's very likely they'll wait until the 11th hour to do it.

Because nobody really likes passing a benefit

cut or a tax increase.

For today's workers, the options are not a lot of fun.

I mean, it's either you pay more

or you get less or some combination thereof,

no matter what choice or combination of choices is made.

There will be losers.

Of all the things we can't agree on in the US, it's clear

that across party lines and all

ages, people value Social Security.

One of the beauties of the Social Security program is it

sort of like we're all in this together, you know?

We're all funding these benefits,

we're all benefiting from them, and it's kind of a compact

between generations to take care of each other.

When we face retirement, death or disability.