Our featured article of the month, Social Security: The Elephant in the Room, outlines the history and some of the challenges facing the Social Security system. From its beginning, the system was designed to help those who had very little and who ultimately lived much shorter lives in retirement. Now, the system has expanded its beneficiaries beyond the original scope of the plan and is obligated to support retirees’ elongated life expectancies without much modification.
Social Security’s predicament is not unique, as other countries are struggling with the same reality. The post-World War II baby boomer generation is a larger group of people compared to the generations that follow them. And since the system is dependent upon the next generation paying in to support the prior generation, actuarial calculations were bound to catch up with it. However, this was not a secret, and the prevalence of alternate retirement vehicles like the 401k and IRAs proved invaluable to assist the workforce to self-fund their retirement.
If private company pension systems taught us anything, it’s that plans like these are expensive and major adjustments are necessary. For those already receiving or within grasp of Social Security benefits, congratulations. For readers in my age range and younger, the 50 and under crowd, I have consistently preached about private retirement savings through a 401k or an IRA, and an adjusted expectation that some of Social Security’s promised benefits will be there upon retirement.
Taking full advantage of your employer-based retirement plan will put you on a path to a more secure retirement lifestyle with better peace of mind than relying on a challenged system. For those who need to “catch up,” those provisions were implemented a few years ago, allowing for higher contributions at age 50 and older.
For most Americans, Social Security has represented nothing more than some unavoidable payroll deduction with the positively cryptic initials of “FICA” and “OASDI” (Federal Insurance Contributions Act and Old Age, Survivors and Disability Insurance). It hinted at a future that seemed both intangible and far away.
Yet, some Americans now sit on the cusp of drawing on the promise that was made with those payments.
As the growing wave of citizens approach retirement, questions and concerns abound. Is Social Security financially healthy? How much will my income benefit be? How do I maximize my benefits for my spouse and myself? When should I begin taking Social Security?
Questions & Elephants
Answering these questions may help you derive the most from your Social Security benefit and potentially enhance your financial security in retirement. Before you can answer these questions, you have to acknowledge the elephant in the room.
The Social Security system has undergone periodic scares over the years that have inevitably led many people to wonder if Social Security will remain financially sound enough to pay the benefits they are owed.
Reasonable Concern
Social Security was created in 1935 during Franklin D. Roosevelt’s first term. It was designed to provide income to older Americans who had little to no means of support. The country was mired in an economic downturn and the need for such support was acute.1
Since its creation, there have been three basic developments that have led to the financial challenges Social Security faces today.
- The number of workers paying into the system (which supports current benefit payments) has fallen from 8.6 workers for every retiree in 1955 to 2.7 in 2023. That ratio is expected to fall to 2.3 to 1 by 2036.2,3
- A program that began as a dedicated retirement benefit later morphed into income support for disabled workers and surviving family members. These added obligations were not always matched with the necessary payroll deduction levels to financially support these additional objectives.
- Retirees are living longer. As might be expected, the march of medical technology and our understanding of healthy behaviors have led to a longer retirement span, potentially placing a greater strain on resources.
Beginning in 2010, tax and other non-interest income no longer fully covered the program’s cost. According to the Social Security Trustees 2024 annual report, this pattern is expected to continue for the next 75 years; the report projects that the trust fund may be exhausted by 2033, absent any changes.4
Social Security’s financial troubles are real, but the prospect of its failure seems remote. There are a number of ways to stabilize the Social Security system, including, but not limited to:
- Increase Payroll Taxes: An increase in payroll taxes, depending on the size, could add years of life to the trust fund.
- Raise the Retirement Age: This has already been done in past reforms and would save money by paying benefits to future recipients at a later age.
- Tax Benefits of Higher Earners: By taxing Social Security income for retirees in higher tax brackets, the tax revenue could be used to lengthen the life of the trust fund.
- Modify Inflation Adjustments: Rather than raise benefits in line with the Consumer Price Index (CPI), policymakers might elect to tie future benefit increases to the “chained CPI,” which assumes that individuals move to cheaper alternatives in the face of rising costs. Using the “chained CPI” may make cost of living adjustments less expensive.
Reform is expected to be difficult since it may involve tough choices. But with Social Security playing such a key role for so many retired Americans, lawmakers are expected to come together and find solutions.
1. SSA.gov, 2025
2. SSA.gov, 2025
3. SSA.gov, 2025
4. SSA.gov, 2025
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