Recently, there has been a lot of talk about Social Security benefits running out. With people beginning to live longer, the amount of people receiving benefits continues to grow. The problem is that the number of people paying into the system remains about the same. Without adequate cash flow, some predict that Social Security will go bankrupt.
There are many misconceptions surrounding Social Security. One of the main misconceptions is that the Social Security Trust Fund is a savings account managed by the federal government. While it’s easy to see why people believe this, it’s actually untrue. Social Security benefits are not taken out of a trust fund or savings account managed by the government. They come from the Social Security taxes that are taken out of workers’ paychecks. Therefore, consumers don’t need to worry about SS funds just running out. They need to worry that there won’t be enough tax funds to distribute amongst all of the recipients.
Experts have estimated that the Social Security Administration will need to begin relying on U.S. Treasury Notes around 2018. By the end of 2040 or early 2050, the SSA will need to begin looking for other funding options. This may mean that Social Security taxes will be raised, benefits will be cut, or the government will find another way to fund the program. It has also been reported that the number of people paying into the system versus number of people receiving benefits will eventually become rebalanced. This means that people who have been worrying about their benefits running out can put those worries to rest.