There’s a certain type of headline that keeps making the rounds every year: “Social Security is going broke!” It’s dramatic. It’s clicky. And it can be downright terrifying if you’re nearing retirement or already collecting benefits.

But let’s take a breath and actually talk about what’s happening.

The 2035 Timeline

According to the Social Security Administration’s latest trustees report (May 2024), the program’s reserve funds are projected to run dry by 2035. That’s one year later than last year’s estimate. And, while that might sound like kicking the can down the road, it’s also a sign that the system isn’t collapsing overnight.

Even if nothing changes between now and 2035, Social Security isn’t disappearing, that’s the key thing to know. It would still be able to pay out about 83% of promised benefits through incoming payroll taxes alone.

Not ideal, sure. But far from “gone.”

How Social Security Really Works

The Social Security system operates on a pay-as-you-go basis. Current workers pay into the system via payroll taxes (6.2% from employees, matched by 6.2% from employers), and those funds go directly to current retirees. In 2024, these taxes apply to income up to $168,600. That cap will rise to $176,100 in 2025.

So, when you see your FICA taxes come out of your paycheck, you’re not building a personal savings account. You’re contributing to a massive generational handshake.

Why This Matters

For many retirees, Social Security is more than just a supplement. Arguably, it’s the backbone of their retirement income. Nearly half of all seniors rely on it for at least 50% of their income. It’s part of what financial planners often call the “three-legged stool”: Social Security, personal savings, and workplace retirement plans like 401(k)s.

But the catch to that is the stool only works if all three legs are sturdy. And with Social Security’s long-term solvency in question, personal savings matter more than ever. Maximizing your retirement accounts matters more than ever.

What’s Congress Doing About It?

Any fix to Social Security has to come from Congress, and history shows that bipartisan solutions are possible. The last major overhaul came in 1983, when lawmakers raised the full retirement age and introduced taxes on some Social Security benefits.

Future changes could look like:

• Raising the income cap subject to payroll tax
• Increasing payroll tax rates
• Raising the retirement age
• Adjusting benefits formulas

No one likes any of those options in isolation, but some mix of them will likely be necessary.

What You Can Do

While Washington debates the future, you have your own retirement to plan. That means looking beyond Social Security, here are some general options to get the ball rolling:

• Contribute to a 401(k), especially if your employer offers a match (free money is the best money).
• Open an IRA to diversify your retirement accounts.
• Pay down debt to give yourself more breathing room later in life.

If you’re just starting out, even a small monthly investment can grow into something meaningful over time. If you’re closer to retirement, make sure you understand what role Social Security will realistically play in your income plan.

The Bottom Line

No, Social Security isn’t vanishing. But yes, adjustments are likely coming, and the more prepared you are, the less those changes will sting. At Mediate Financial, we believe in facing the future with clear eyes and a plan to match.

We are an independent firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.