A few weeks ago, this tweet set off a firestorm on Twitter/X: JUST IN: 🇺🇸 US boomers overwhelmingly support higher taxes on younger workers to maintain current Social Security benefits, poll shows. After the usual boomer bashing, the conversation quickly turned to a question I often get from younger readers: Can I count on Social Security in retirement? It’s a fair question. If you’re in your 20s, 30s, or 40s, you’ve probably spent most of your life hearing about how Social Security is going bankrupt. You’ve been told that the trust fund is running dry. While technically true, does it mean that you should plan as if Social Security won’t exist? Not exactly. While the retirement trust fund is projected to run out in 2032, according to the 2026 Trustees Report, benefits will still be paid out, just at a lower percentage. How much lower? 78% of scheduled benefits. That’s a 22% reduction, which is real. But it’s not a 100% reduction! The average Social Security benefit today is around $2,000/month. So, if the trust fund were to run out tomorrow, the average benefit would be around $1,560/month [78% of $2,000]. That’s not great, but it demonstrates that something will continue to be paid even in such an undesirable scenario. Given this, the question isn’t whether Social Security will exist in the future (it will), but how much of it can you count on when you hit retirement? Let’s take a look at the numbers. What Happens After the Social Security Trust Fund Runs Out of Money? Social Security benefits are paid out from two sources: taxes on existing workers (i.e., payroll taxes) and the trust fund. Well, technically, there are two trust funds. The main one is Old-Age and Survivors Insurance (OASI), which pays retirement and survivor benefits. And the other is Disability Insurance (DI), which pays disability benefits. The DI fund is in good shape, projected to pay full benefits through the end of the 75-year projection window in 2100. But OASI isn’t. That’s the one estimated to run dry in 2032. While these two funds are often quoted together as OASDI, money can’t move between them without Congress passing a law. Let’s assume that doesn’t happen, so OASI is what we will focus on for retirement benefits. And OASI has been running out of money since 2021. That was the first year where benefits paid to retirees exceeded the total payroll taxes collected from workers plus interest income on OASI. As a result, principal had to be withdrawn from the OASI trust fund. This will continue until the trust fund runs out in 2032. What happens then? Since Social Security can’t borrow funds, it can only pay out what it takes in. So once the trust fund is empty, benefits would have to be brought down to whatever payroll taxes can cover. Right now that estimate is 78% of scheduled benefits in the first year. After that, the percentage declines as the ratio of workers to retirees continues

Bankers get short thrift in post-apocalyptic storytelling. As our heroes sit around a wasteland campfire – burning dollar bills for warmth and one-upping each other with reminiscences about air travel and chicken nuggets and being able to breathe without a respirator – no-one ever says: “Oh, and let’s remember the bankers. How I miss those guys!” I mean, perhaps the bankers brought it on themselves? Either way, we might soon discover how much we miss banks as […]