Social Security is a longstanding part of working and retired Americans’ financial lives. President Franklin D. Roosevelt enacted a limited form of the program in 1935. The “social insurance” program was designed to provide a safety net against outliving one’s savings.

Social Security has grown in scope massively since the 1930s, and it represents an important stream of retirement income (as well as survivor benefits and disability benefits) for millions of Americans. However, changing demographics and the wholesale retirement of Baby Boomers call the program’s viability into question. A lot has been postulated in recent years about Social Security’s challenges.

The Social Security Board of Trustees released their annual report on April 22. The behemoth 270-page report discusses the financial condition of the system and provides long-term projections. To put it simply, there is no threat to the program’s viability in the short run. However, the medium- to long-term outlook remains unsettling.

In the 2019 Annual Report to Congress, the Trustees announced:

• The asset reserves of the combined Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds increased by $3 billion in 2018 to a total of $2.895 trillion.
• The total annual cost of the program is projected to exceed total annual income, for the first time since 1982, in 2020 and remain higher throughout the 75-year projection period. As a result, asset reserves are expected to decline during 2020. Social Security’s cost has exceeded its non-interest income since 2010.
• The year when the combined trust fund reserves are projected to become depleted, if Congress does not act before then, is 2035 – gaining one year from last year’s projection. At that time, there would be sufficient income coming in to pay 80 percent of scheduled benefits.

What are some ways lawmakers could address the projected shortfall?

• Raise the cap on earnings subject to Social Security
• Raise the payroll tax
• Raise the age to be eligible or stiffen eligibility requirements
• Change the percentage increase each year someone waits to take Social Security
• Invest differently

It is difficult to predict what action Congress might take or when they might take it. From a financial planning standpoint, we remember that Social Security is not intended to be the only, or even the biggest, source of one’s retirement income. Rather, it should supplement other retirement savings.

The Social Security Administration states that the average retiree’s monthly Social Security retirement benefit is $1,461. The maximum Social Security benefit for a worker retiring at full retirement age is $2,861. The average monthly benefit for a couple who are both receiving benefits is $2,448.

Those of us not retired yet can find personalized estimates of our future benefits at ssa.gov/myaccount. Please feel free to reach out if you would like to discuss your Social Security benefits within the context of your overall retirement planning. Social Security is an important topic to all of us, and we will continue to monitor updates as time goes on.