Is Fear of Social Security Running Out of Money Hurting You?

Capitol Building with an hourglass in the foreground and a Social Security card trapped inside

(Image credit: Getty Images)

Catherine Collinson is CEO and president of the Transamerica Center for Retirement Studies, a nonprofit organization dedicated to educating the public on saving and planning for retirement.

As Social Security celebrates its 90th anniversary, she discusses current and future pressures on the system — and possible ways forward — with Kiplinger Personal Finance Magazine.

Q: In a recent Transamerica survey, "Social Security Turns 90," 71% of workers were concerned that Social Security won't be there when they are ready to retire. Does that concern you?

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Yes, it worries me that the looming depletion of the Social Security Trust Fund [in 2033, for the retirement fund, based on recent estimates] may lead to suboptimal decision-making.

People may think, "I had better start claiming as soon as I’m able to," which for most is age 62. That could mean a steeply reduced benefit for the rest of their life.

The widespread fear that Social Security won’t be able to pay any benefits is not grounded in truth. Depletion means that, if that time comes, the system will be able to pay only 77% of guaranteed benefits.

As long as money is coming into the system through payroll taxes, which provide the majority of funding, there will be money available to pay some benefits.

Q: Do you think something will be done before a cut in benefits happens?

I have faith in the system. Social Security is the cornerstone of retirement income in this country.

It’s going to take political will and bipartisan efforts, but there’s way too much at stake for current and future generations of retirees. Legislation related to retirement security has a long and successful history of bipartisan collaboration. I expect that to continue.

Q: What kinds of Social Security reform could we see — and how can people prepare?

We could see a reduction in benefits, an increase in the payroll tax [now 6.2% each for employees and employers], raising the full retirement age [currently 67 for those born in 1960 or later] or a combination.

When people are planning for retirement, they should be mindful of how potential reforms may impact them. If you think there might be a cut in Social Security benefits, ask yourself, "Should I be working longer, maybe work part-time in retirement? How could I save more or reduce my debt?" Really explore the options.

Q: To address Social Security’s shortfall, respondents to your survey favored increasing the earnings subject to payroll taxes, raising the payroll tax rate and preserving benefits for retirees in greatest need. Just 22% said to raise the retirement age. What’s your view?

I think it’s going to take a combination of methods. Of the potential reforms, raising the retirement age is the one that worries me the most.

Many people find themselves forced into retirement sooner than expected due to circumstances beyond their control.

Our retirement age is already one of the oldest in the world. In France, it’s rising from 62 to 64 by 2030. In China, it’s going from 60 to 63 for men and from 50 to 55 or 58 for women in the next 15 years.

Q: Some experts think any changes to Social Security will only affect people younger than 50.

I’m not going to speculate. My hope is that people already collecting benefits will be exempt from changes; it would be difficult to pull the rug from under (older people) living on Social Security.

Q: Customer service at Social Security has become a bigger problem lately, with some people waiting hours for help. Any advice?

Budget extra time and energy. I don’t know that staffing shortages can be addressed overnight.

In time, we’re going to see some technological innovations and sophisticated tools that will really help people to plan what their Social Security benefits will look like, understand their claiming options and get personalized guidance. AI is going to be extremely helpful.

Q: Are you optimistic Social Security will be in better shape on its 100th anniversary in 10 years?

I certainly hope so. By then, we will have navigated through those reforms, and the Baby Boomer generation will be entering its 90s — and many will be passing away.

With smaller generations of retirees following them, the shift should eventually ease pressure on the Social Security system.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Richard Eisenberg is an "unretired" personal finance writer, editor and podcaster. He writes a column for Dow Jones' MarketWatch; freelances for outlets including Kiplinger, AARP The Magazine, PBS' Next Avenue, The Stanford Center on Longevity Magazine and People magazine; and is co-host of the Friends Talk Money podcast for people over 50.

Previously, he was managing editor at Next Avenue, executive editor at Money magazine, special projects director/money editor at Good Housekeeping and director of NYU Summer Publishing Institute's Digital Media Strategies Program. He is the author of "How to Avoid a Midlife Financial Crisis" and "The Money Book of Personal Finance." Eisenberg graduated from Northwestern University's Medill School of Journalism and lives in New Jersey.