Is the US running out of Social Security?

Social Security is in trouble the program is quickly running out of cash Millennials and younger don't believe that they're going to a penny of Social Security as a millennial this has been my introduction to Social Security it's like the government pulls some money from my paycheck and then it goes into some imaginary fund that maybe I'll never see again the truth is I know embarrassingly little about this program that most Americans rely on for retirement before you go and dive into the comments it seems nobody gets it this poll looked at people near the retirement age who are about to start collecting it but rather than succumb to the void like I want to I read entirely too much about it so you don't have to so what is social security and is it actually doomed it's really hard to overstate how important Social Security is the official name of Social Security is is the old age survivors and disability insurance program it can kind of be broken down into three parts most people are familiar with the old age one that's retirement it's the biggest source of income for most retirees see the chart actually here's an updated one in 2022 this program alone was responsible for keeping nearly 165 million older Americans above the poverty line but it's also so important for families it supports people when a parent or a spouse dies you know when they're still of working age it supports people if they become disabled and are not able to continue working and supporting their families thus the name every us worker pays into Social Security via a payroll tax well over 90% of American workers just pay 6.2% of their wages out of every paycheck into Social Security and then their employers pay another 6.2% there is a cap on this tax though as in if you make more than a certain amount of money the government's only going to tax a portion of it for Social Security the cap this year is $168,600 still with me or are you sinking into the void of financial lingo come back we're almost there now you can literally look at your pay stub and see where the Social Security tax comes out this money goes into two trust funds managed by the federal government and is then used to pay out the people who are currently collecting typically in the form of monthly checks when you higher the size of that check is determined by the average of how much you've made throughout your working life and the age you start to collect as of now retirees can start collecting at age 62 but they won't max out the benefit unless they wait until they're 70 so to recap current workers pour money into trust funds and those trust funds are used to pay out current beneficiaries as long as people are working this tax is being paid and there will always be money in those funds so why does everybody keeps saying it's being drained so the reason that Social Security faces a long-term financing shortfall is the Aging of the population in other words Boomers here's a chart of the US population as you can see there's a bump here that's the baby boomer generation for decades this giant population was the main Workforce that paid into Social Security that means more people were putting money in than taking money out so those trust funds that we talked about earlier had a surplus and the US Treasury took that extra money and invested it and those Investments ultimately gave us a $2.9 trillion Reserve then came 2021 at this point Social Security stopped operating in a surplus and actually fell into a deficit because more and more people started to collect we just don't have quite as many workers supporting each beneficiary as we used to but it's fine right now because 2.9 trillion is a nice pile of money that's been supplementing the shortfall so every social security check a beneficiary gets right now is kind of made up of two things about 80% of that is the trust funds that are being filled by everyone still working and about 20% is coming from that $2.9 trillion Surplus and that Surplus is what's predicted to run out by 2033 and then after that point um about 10 years from now there is some uncertainty about what what will happen what won't happen is a total draining of Social Security there will always be benefits in some form it may look different from the Social Security benefits that are paid now but there's really no question of whether Social Security benefits will be paid far into the future what those benefits look like entirely depends on how Congress decides to restructure the program to get over this baby boomer [Music] conundrum this episode is presented by Metro by T-Mobile this tax season Metro wants to help customers avoid wasting dollars by using their tax refunds to catch up on things that they want not on things they don't according to Metro you don't take Y yata in life so don't take y yata from your wireless provider Metro by T-Mobile has no contracts no credit checks and no surprises Metro does not influence the editorial process of our videos but they do help make videos like this possible to learn more you can stop by one of over 6,000 metro stores nationwide now back to the video so there are a few options for restructuring the program let's talk about the top five in a very Bland and unbiased way starting with the high earners a lot of very wealthy people they don't get their money through salaries like I make more in a salary than Jeff Bezos does for example and so he pays less in Social Security than I do thanks Jeff at least one bill is fighting to add a social security tax to high investment income which is where a lot of rich people make and keep their money then there's this we could remove or change that $168,000 salary cap the most popular option is to change the payroll tax cap you know either to get rid of it all together or to raise it so that it covers more of you know high high wage people's earnings these nexts to send people into a rage but they are kind of the most obvious raising the payroll tax would immediately start pumping more money into Social Security and help offset the imbalance of beneficiaries and workers and cutting the amount each person can actually receive would balance those scales even further but this is wildly unpopular across party lines and with the public granted if Congress were to do nothing in 2033 benefits would automatically decrease and this option you've probably heard this before it did not go over well in France raising the full retirement age is a benefit cut full stop for everybody it means 7% lower benefits over a Lifetime on average for each year that you raise the retirement age it's hard to predict exactly what Congress will do but it's very likely they'll wait until the 11th hour to do it because nobody really likes passing a benefit cut or a tax increase for today's workers the options are not a lot of fun I mean it's either you pay more or you get less or some combination thereof no matter what choice or combination of choices is made there will be losers of all the things we can't agree on in the US it's clear that across party lines and all ages people value Social Security one of the beauties of the Social Security program is it's sort of like we're all in this together you know we're all funding these benefits we're all benefiting from them and it's kind of a compact between generations to take care of each other when we Face retirement death or [Music] disability [Music]

Channel: Vox

Views: 775,628

Keywords: SSA, Taxes, Vox.com, beneficiary, benefits, disability, economy, explain, explained, explainer, finance, funds, government, income, investment, money, old age, payroll, policy, politics, retirement, retirement age, social programs, social security, social security administration, survivors, tax, trust funds, united states, us, vox, wage gap

Id: j1Bfxxhdn6g

Length: 8min 13sec (493 seconds)

Published: Thu Mar 14 2024