Is Social Security Going Broke?

September 7th, 2021 by Jim Allen

This week, Treasury Department officials announced that the Social Security “Trust Funds” that are designated to pay Social Security benefits are now expected to be depleted by the end of 2033. This news garnered big headlines in the media as a major doom & gloom event. This is a one-year drop from the previous calculation where the funds would be exhausted in 2034. The drop is due to the impact COVID had on our economy and was expected to be much worse. In fact, some experts were predicting a depletion date of 2026. While the decline in Social Security tax payments did have an impact, it was somewhat offset by the increase in mortality due to COVID. In reality, a one year drop only in the depletion date is actually good news.

So, what does this mean in terms of your Social Security benefits?
• Unless Congress acts, incoming Social Security taxes would only support about 78% of projected benefits once the trust funds were depleted
• If you took this literally, then everyone on Social Security would get a 22% pay cut on their monthly benefits
• Even if you took the worst-case scenario, benefits would not stop but would be cut pretty significantly

But let’s look at reality. Even if Congress does nothing to strengthen the trust fund before it runs out, they can simply contribute or loan funds to it to keep it going indefinitely. Social Security nearly went broke in 1982, and that’s exactly what Congress did. They provided long-term low interest loans to keep the fund solvent.

The government has the ability to replenish the trust funds any time they wish. It is really no different than when you move funds from your savings account to your checking account when the checking account starts to run low. Because Social Security benefits are the backbone of most retiree’s financial security, cutting their benefits would be a sure way for members of Congress to be elected out of office. Social Security and Medicare are such important topics for retirees that nobody wants to deal with the issue.

It is a fact that at some point, the problem is going to need to be dealt with.
• We have an aging population with increasing longevity
• And, fewer workers coming in behind them to pay into the system
• Social Security is a giant pyramid (some would say Ponzi) scheme where the benefits received by retirees are funded through payroll taxes paid by current workers
At this point, the pyramid has become top heavy with Baby Boomers and is on the verge of tipping over. The problem is not going to get better without addressing the issues.

But the question is how? Most likely, it will be through:
• Extending the full retirement age out to 70
• Lowering future cost of living increases
• Expanding the Social Security tax
• A combination of all of these.

However, this will likely be for our children and grandchildren. For those of you who are already on Social Security or are nearing that time, you can rest assured that your benefits will not be impacted.

If you would like to learn more about Social Security benefits and how to get the most from them in retirement, we will be conducting workshops on Maximizing Social Security during September.
• On Wednesday September 15th at 6 pm, we will hold a virtual workshop / webinar.
• We will also be returning to live workshops in September, holding two in the city of Brea at the Brea Community Center. The dates are:
o Thursday, September 23rd at 6 pm
o Tuesday, September 28th at 6 pm
You can get more information or register for these events on our website at

Jim Allen, CFP, ChFC, EA, CDFA is President, Sr. Advisor and a Principal at Anchor Bay Capital. In addition to his 30+ years of financial planning experience and his professional credentials, he holds a Master’s Degree in Financial Planning and is a former instructor in the CFP program at the University of California Irvine. He is also the co-author of the book “The Tools & Techniques of Charitable Planning.” Jim can be reached at [email protected]