The Social Security Scare - It's Getting Old!

Recently, you may have seen reports that the so-called “depletion date” for Social Security was adjusted. This refers to the predicted date when the long-running program will no longer be able to pay full benefits. Barring action from Congress, the Treasury Department predicts that 80% of benefits will be paid by 2034. This is one year closer than last year’s prognosis.¹ Because I am only a few years away from collecting my social security, my ears perk up when I hear anything adverse to my plan of receiving monthly benefits.

 According to Social Security Administration estimates, ninety-seven percent of older adults (aged 60 to 89) either receive Social Security or will receive it. Therefore, it is impractical to believe that members of Congress would jeopardize their political aspirations by failing to ensure that the American people receive their promised full benefits when, for decades, most have been paying into the system in which they expect to receive back, with interest. Below is a summary of the “Taxable Wage Base” that social security tax has been applied to for the past 20 years. Increasing the wage base increases the total tax.

The year 2034 is eleven years away. The wage base has increased by 6% since 2012, eleven years ago. If the same rate applied from today’s wage base of $160.2K to eleven years from now in 2034, the wage base would be $233,098 – an additional $73K taxed at 6.20% (approximately $4,400 per person).  The total increase in the wage base since 2004 (20 years) ago has risen 82%. I don’t believe either political party will ever let this happen, but we can imagine what our deficit will look like in the next several years if we don’t make positive adjustments.

You’ll never catch me predicting the future, but you don’t need a crystal ball to see that this pattern has continued for a long time. To paraphrase Mark Twain’s famous quote, reports of Social Security’s demise have, once again, been greatly exaggerated. That being said, your financial strategy considers many situations, even the very unlikely ones.

Rest assured, if I feel that a major change in public policy is coming, one that will affect your retirement income, you’ll likely hear it from me before you read it in the paper.

^{1. CNBC.com, March 31, 2023}