The Social Security system in the United States has been facing liquidity problems in recent years. An aging population that uses resources more and more years, due to high life expectancy and increasingly better health in old age, is one of the factors that add to others. For example, the growing number of people who work on a freelance or contract basis and who do not contribute their respective Social Security taxes is involved in this looming crisis.
As you already know, if you pay your respective taxes to Social Security at this time, that is not “your money”, but with those funds the payments of the beneficiaries who are currently collecting are made. This money goes to retirement payments, Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI) and other programs that also reach heirs and relatives of deceased beneficiaries.
A Red Alert About Social Security Funds Depletion
In the most recent report of the Social Security trustees warns that a cut of up to $235 per month could happen for each beneficiary if what is so feared happens: that the Social Security financial funds that cover old age and disability payments will be exhausted in 2035, which is just a little more than a decade.
It is also estimated that the critical date for the Medicare program will be the following year, that is, in 2036. If that happens, the payments of people with disabilities or serious illnesses for that year will be affected.
The impact of the financial deficit of these two programs would translate into a cut to the payments of millions of Americans who depend on Social Security and their monthly payments to make ends meet.
More and More Baby Boomers Are Retiring: Is It a Risk for Social Security?
And is that the baby boomer population is booming in the United States, according to the latest data and trends recorded in censuses. The U.S. Census Bureau reported in 2022 that for the first time in history there were more people aged 65 and over (59.3 million) than children under 18 (58.6 million), and that represents a red flag for Social Security and other federal benefit programs.
The trend is expected to continue with a projected increase in the population aged 65 and over to 95 million by 2050, which would be a quarter of the population of the entire United States.
The baby Boomer generation, born between 1946 and 1964, make up a large part of the aging population. In fact, in 2023 the first wave of baby boomers who reached the age of 67 began to retire, which is the full retirement age in the United States Social Security program.
It also greatly impacts the increase in the average age in the United States, which has been steadily increasing in recent decades. The same 2022 census report says that the average is 38.8 years, and that trend is going to go up as the population gets older in America. Life expectancy has also been increasing, with an average of 78.6 years in a 2020 measurement.
Average Monthly Social Security Benefits in 2024 and the Projected Cut In 2035
If Congress and the United States government do not do something to save the Social Security and Medicare trust funds, you will not be able to enjoy 100% of your benefits when you reach retirement if you have to do it after 2035, in case the panorama does not change.
As of January 2024, the average monthly Social Security benefit is $1907, according to data from the SSA itself. It is expected that by 2035, in case the Social Security trust funds are exhausted, a 17% cut will have to be applied for the beneficiaries. Taking the average of 2024 and applying that 17% cut, starting in 2035 people would receive a check of $1582.81.
There is the average cut of $324.19 per month, which represents an annual reduction of $3900.