Many Americans rely on Social Security benefits throughout retirement.
The program functions as a pay-as-you-go system through which retirees or disabled workers receive benefits that the government collects from payroll taxes.
However, the program has paid out trillions more than it has collected, leaving the future of the program in jeopardy.
Beginning in the early 1980s, taxes collected did not cover the benefits given, resulting in insecurity about the program’s future and longevity.
To alleviate the deficit, Congress changed the law so that the full amount of benefits would be covered by taxpayers in any given year.
Despite the change, the payroll tax no longer covers the cost of Social Security. The complexity and confusion around Social Security trust funds make it difficult for most people to understand what they’re likely to receive.
Social Security trustees claim that, despite the efforts to reconcile the plan, the trust funds presently face a shortfall of $16.8 trillion, leaving many Americans concerned for their financial futures.
Unless Congress takes action to reform the program, retirees will not receive full benefits through the plan.
Take our quiz to test your knowledge of the Social Security trust funds and what the current shortfalls could mean for you or your clients. To learn more, check out The Social Security Trust Funds, Explained.