If you are an adult for whom the golden years are beginning to appear on the horizon, you may be wondering what will become of social security in the future. You would certainly not be alone in your concerns. The majority of people born after 1970 have spent their lives hearing that Social Security will go extinct before they get a chance to reap the benefits. While it is true that SS has its challenges, its future may not be as dire as popular culture depicts.

How Did it Start?

The Social Security Act became US law in 1935, the brainchild of President Franklin Roosevelt. Its development was influenced by the Great Depression, which so disproportionately impacted the disabled and elderly that Roosevelt and his cabinet felt the need to create a stabilizing economic system that would protect the country’s most vulnerable citizens. Thus, the tax-funded social security system was born.

How Does it Work?

Social Security is funded by taxpayers, who contribute (involuntarily) a portion of the first $128,000 dollars of their earnings into the Social Security trust. When retirees reach a certain age, they become eligible to apply for benefits. The amount distributed is calculated using the average income from your most profitable thirty-five years and your life expectancy. Because your monthly payments are distributed according to estimated longevity, the longer you delay applying, the more you can collect monthly Social Security benefits. When SS was initiated, there were far more working taxpayers than there were SS beneficiaries, so the fund continued to grow for many decades. However, beginning in the 1980s, that trend began to reverse, as the life expectancy of Americans began to climb and birth rates simultaneously dropped, leaving fewer workers to supply the funds needed for a growing retired population.

Could it Disappear?

Though changes will need to be made, Social Security is not expected to disappear. Current projections predict that the trust will run dry in 2037 if the SS administration does nothing to prevent it. That does not necessarily mean that SS will disappear, it means that new methods for funding the system will need to be developed. Sustainability of the SS system has been a long-term project for the administration, and it is confident that alterations to the current taxation model will generate the revenue necessary to continue SS beyond the 2037 wall. Future retirees should prepare for one likely possibility, however; a shortfall of expected funds could force the SSA to reduce benefits or advance the age of application. So, while SS is probably going to be around for our retirement, it may only provide fifty to seventy percent of what we were expecting, and the age of retirement with full benefits could be bumped as high as seventy years. Successful retirement planning should take these risks into account, and you would be wise not to stake your future on SS benefits alone.

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