When Social Security Runs Out: a Look at the Program in 2035


Social Security’s future remains uncertain, prompting people to ask, “Will Social Security ever run out?” According to the Social Security board of trustees’ 2021 annual report, the program’s cash reserves will be depleted by 2034 – one year sooner than their 2020 report indicated. After that, annual taxes are expected to cover only about 78 percent of the benefits.

Discover what else is in store for Social Security in the near future and how the program will look in 2035 — you may want to start learning how to stretch your money now.

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Why Is Social Security in Peril?

Longer life expectancies, a shrinking working-age population, and an increase in the number of retirees all contribute to the problem. By 2035, the number of Americans aged 65 and older will exceed 78 million, up from approximately 56 million today. As a result, more people will withdraw funds from the Social Security system — but fewer will pay into it.

That is not to say, however, that the program will run out of funds entirely. Payroll taxes should cover approximately 78 percent of scheduled benefits. However, if the funding gap is not closed, retirees may receive lower Social Security benefits and workers may be required to contribute more to the system. According to experts, if no changes are made, this is how Social Security may look in the future.

Worst-Case Scenario: Benefits May Be Reduced

If you plan to rely on Social Security in 2035, keep in mind that you may receive less in benefits than you anticipated. If no changes are made to address the trust fund shortfall, benefits will have to be cut by 22%, according to the board of trustees’ 2021 annual report.

For many retired adults, such a reduction in benefits would be a significant financial hit. According to the Social Security Administration, Social Security provides at least half of the income for 50% of elderly married couples and 70% of elderly single people.

Is It Sufficiently Likely That Benefits Will Be Reduced?

Some experts doubt that a significant reduction in Social Security benefits is imminent.

“The ramifications of that event would be far-reaching for the entire country,” said Joseph E. Roseman Jr., a Social Security expert and retirement planner at Retirement Capital Planners. “You’re on the verge of a national disaster.”

That is why he believes Congress will intervene before 2035 to avert such severe benefit cuts. Mary Beth Franklin, a Social Security expert and contributing editor to Investment News, concurs.

“As pensions dwindle, people are increasingly reliant on Social Security,” she explained. Due to the program’s popularity, politicians are unlikely to want to tinker with existing retiree benefits and will likely have to find other ways to address the trust fund shortfall.

Social Security Benefits


Possibilities for Balancing Social Security’s Budget

Even though Social Security is not expected to run out of money until 2034-2035, several proposed changes to address the budget shortfall have already been floated. Among these alternatives are the following:

  • Raising the rate of payroll tax
  • Raising the minimum wage that is subject to Social Security taxes
  • Raising the retirement age to its maximum level
  • Annual cost-of-living adjustments should be reduced


Benefits reduction

Continue reading to learn more about each of those proposals and the impact they would have on Social Security if implemented.

The Social Security Employer Contribution Rate Could Increase

If benefits are not cut, the program’s tax revenue will almost certainly have to increase. Increase the payroll tax rate is one way to accomplish this. Social Security is funded by a 6.2 percent payroll tax paid by workers, plus an additional 6.2 percent paid by employers (self-employed people have to pay the full 12.4 percent ).

What Would Occur

As trust fund reserves deplete, the payroll tax would need to be increased sufficiently to fund the program. If nothing is done until 2034 or 2035, that increase will have to be more pronounced.

Roseman, on the other hand, does not expect Congress to increase the payroll tax in order to bolster trust fund reserves. “There is probably less appetite for that than for anything else,” he said. “It is an increase in taxes.”

How Social Security Would Look in 2035 if This Change Is Implemented

Increases in the payroll tax rate can take a variety of forms. At the moment, the total payroll tax is distributed equally between employee and employer. Employers and employees could share the tax increase equally, or the employer could receive a larger share in order to conceal the tax increase from taxpayers.

Rep. John Larson’s (D-Conn.) legislative proposal, dubbed the Social Security 2100 Act, favors the latter option. It would increase the federal payroll tax rate for employers by 6.2 percent, but would exempt employees earning more than $400,000. While the bill has garnered some support, Politico reports that it has so far stalled in Congress.

Another way to increase tax revenue to fund Social Security is to increase the taxation of earnings. Social Security taxes are levied on wages up to the Social Security contribution and benefit base.

What Would Occur

To keep the trust fund solvent, Franklin said, the taxable wage ceiling would have to be increased even further – or eliminated entirely – so that all income would be subject to the payroll tax. This change would affect high-income individuals whose earnings exceed $137,700 are currently exempt from Social Security taxation.

How Social Security Would Look in 2035 if This Change Is Implemented

Increases in the taxable wage ceiling would affect only those whose earnings exceed the current contribution and benefit base. For example, if you earn $80,000 per year, you pay Social Security taxes on all of your income, regardless of whether the limit is increased to $130,000, $300,000, or eliminated entirely.

If you earn $250,000 as a W-2 employee, however, you pay Social Security taxes on the first $137,700, or $8,537.40. If the limit was increased to $300,000, you would pay Social Security taxes on your entire $250,000 income, totaling $15,500.

The Age of Full Retirement Could Be Increased

Because tax increases are unpopular, Roseman believes Congress will more likely raise the full retirement age for Social Security benefits. This means that younger generations will have to work longer in order to qualify for benefits.

At the moment, the age at which you can collect full retirement benefits ranges from 65 if you were born before 1937 to 67 if you were born after 1960.

What Would Occur

Both Roseman and Franklin stated that there are proposals to gradually raise the full retirement age to 69, which would result in more money remaining in the trust funds. Simultaneously, it may eliminate a popular strategy used by retirees to maximize their Social Security benefits. Currently, if you delay collecting retirement benefits past your full retirement age, your benefit increases by one year for every year you delay until age 70, Roseman explained.

How Social Security Would Look in 2035 if This Change Is Implemented

Raising the retirement age may appear to be a reasonable response as life expectancy increases, as people have more time to work. However, raising the retirement age effectively reduces benefits by delaying the payment of anticipated benefits. Additionally, the overall increases in longevity have not been felt by many low-income workers, who live shorter lives than wealthy people. The elderly and those on low incomes would almost certainly be the hardest hit by an increase in the retirement age.

Social Security’s Cost-of-Living Adjustment Could Be Reduced

Most years, retirees receiving Social Security benefits see a slight increase in their checks to keep up with inflation. The consumer price index is used to calculate these cost-of-living adjustments, or COLAs. The last few years have seen an increase of 2.8 percent in both 2018 and 2019, 1.6 percent in 2020, and a whopping 5.9 percent in 2021.

What Would Occur

To keep the Social Security trust funds solvent, Roseman suggested that cost-of-living adjustments could be reduced. Most likely, the formula would remain unchanged for individuals born prior to 1960. However, those born after 1960 may see a decrease in the COLA, he said.

If this occurs, benefit checks will fall behind inflation. Individuals who rely heavily on Social Security may have to find creative ways to cut spending in order to make ends meet.

How Social Security Would Look in 2035 if This Change Is Implemented

As demonstrated in recent years, inflation adjustments to Social Security benefits can be minimal. Low cost-of-living adjustments may make it extremely difficult for people on fixed incomes to meet their expenses in areas where housing and rent costs continue to rise year after year. Additionally, seniors spend more on healthcare costs than younger people, which typically increase faster than the cost of inflation.

Benefits May Be Reduced

The funding gap could be closed by either reducing benefits for all Social Security beneficiaries – including those currently receiving benefits – or simply by reducing benefits for future Social Security beneficiaries. However, if nothing is done until 2034 or 2035, all benefits would have to be reduced by 22%.

What Would Occur

If Social Security’s reserves deplete in 2034-2035, benefit cuts could take a variety of forms. The most straightforward cut would be one that is uniform across the board. Another possibility would be to adjust benefit reductions according to income. For example, the top 25% or 50% of earners’ benefits could be reduced, while lower-income Social Security recipients’ benefits would remain unchanged.

Similarly, Social Security could become a means-tested benefit, with recipients’ eligibility determined in part by their income or other assets. Currently, if you have paid into the Social Security system, regardless of your income or assets, you will receive benefits.

How Social Security Would Look in 2035 if This Change Is Implemented

In 2020, the average monthly retirement benefit will be $1,503. If benefits were cut by 20% across the board, the average monthly benefit would decrease by approximately $301, or $3,612 per year. If benefits were to be reduced by 23%, the monthly reduction would be $346, or $4,152 per year.

Is This a Straightforward Problem to Solve?

According to Roseman, the Social Security shortfall problem is simple to solve — but getting Congress to make the necessary changes is not. “Nobody wants to make a concession,” he stated.


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Roseman, however, does not believe Social Security will run out of money. He advises his clients to count on it as a source of retirement income, but not as their sole source. “I would never recommend that anyone live solely on Social Security,” he said.

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