If you are wondering about the future of Social Security, you are not alone. Many of us can surmise that Social Security may see its shortfalls and challenges eventually, but what is the actual prognosis?

The Federal government contends that, unless Congress acts to intervene, Social Security shortfalls are expected beginning in 2035.   The Trustees of the Social Security trust fund have reported that if Congress doesn’t take action, the fund’s balance will reach zero in 2035.

By way of background, it should be noted that Social Security retirement benefits are financed primarily through dedicated payroll taxes paid by workers and their employers, with employees and employers splitting the tax equally. Employers pay 6.2 percent of an employee’s income into the Social Security system, and the employee kicks in the same. Self-employed individuals pay the entire 12.4 percent Social Security payroll tax. This money is put into a trust fund that is used to pay retiree benefits. Learn more.

Some of the reasons for the projected shortfall is that more people are retiring than are working, so the program is paying out more in benefits than it is taking in. In addition, individuals are living longer, so they receive benefits for a longer period of time.

It should be noted that once the fund runs out of money, it does not mean that benefits stop altogether. Instead, retirees’ benefits would be cut. According to the trustees’ projections, the fund’s income would be sufficient to pay retirees 77 percent of their total benefit.

Since Social Security is immensely popular, lawmakers are unlikely to allow steep benefit cuts to take place. The last time the program was in financial trouble and received a major overhaul was in 1983, when President Ronald Reagan and congressional Democrats struck a deal to increase taxes and gradually raise the retirement age from 65 to 67.

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