Dear Rusty: Has someone who paid into Social Security for most of their life ever lost their benefits later in life? For example, if they start collecting benefits at age 62 and live to be 85 or longer, could they suddenly lose their benefits? Can Social Security ever come along later and say “Sorry, you’ve used up all your benefits?” I know there are many people, including me, who have no other income or savings, so if their SS suddenly stopped they would need assistance to survive. I started my benefits at age 62 because I had to. I’ve always been in reasonably good health, so I wonder – what if I live to be 85, 90 or 95 – will I still have enough in the system to get my Social Security check? Signed: Living on SS
Dear Living: Please put your fears about losing your Social Security aside – you will never stop receiving your benefits even if you live to be 110 years old. The system isn’t designed to compare what you’ve collected to how much you’ve contributed. If you meet the basic eligibility requirements, there is no danger of your payments ever stopping because you’ve “used up all your benefits.”
Here’s how the Social Security system works: Everyone who works pays a Social Security payroll tax (currently 6.2%; matched by their employer) up to the annual payroll tax cap. All those payroll taxes collected are used to pay benefits to all those who are already collecting Social Security – the payroll taxes you paid weren’t put into a separate account for you. Essentially, the system is “pay as you go,” where everyone who works and earns pays for those already receiving benefits. So, the benefits you are now receiving are not being deducted from a personal account in your name. Everyone currently working and contributing to Social Security helps pay for your benefits, as well as benefits for everyone else already collecting. Any money left over after all benefits are paid are invested in special issue government bonds, which are held in the Social Security Trust Funds, earning interest which accrues into the Trust Funds. Money from income taxes on Social Security also contributes to SS revenue to pay for benefits. As of the end of 2019, the Social Security Trust Funds held about $2.9 trillion in assets, reserved to cover any shortage of SS income received vs. benefits paid out.
You may have read about Social Security facing future financial difficulties. That is primarily a result of the declining ratio of workers to beneficiaries and increasing life expectancy (average longevity for SS recipients today is mid-80s). Starting this year, the reserves in the Trust Funds will be used to cover any income shortfall. The last official report from the Trustees of Social Security predicted that the SS Trust Funds assets are sufficient to pay full benefits until about 2035 (the effects of the COVID-19 pandemic will surely worsen that prediction). But even if Congress fails to act to resolve the issue and the Trust Funds run dry in the future, your benefits will still continue. If the Trust Funds run dry, however, your benefit would be reduced (not eliminated).
If the Trust Funds are fully depleted, Social Security can only pay out as much as the income received, which would mean a benefit reduction of about 21%, according to current predictions. Sadly, Congress already knows how to fix Social Security’s financial issues - what’s lacking is the bipartisan cooperation needed to accomplish it. Personally, I do not believe that Congress will ever allow the Trust Funds to run dry, requiring a cut in benefits (it would be political suicide to do so). Given the vitriol permeating Congress today we’ll probably need to wait a while for a solution, but one will eventually come. In any case, please rest assured that your Social Security benefits will never stop, no matter how old you get. You can’t “use up all your benefits.”
Russell Gloor is an Association of Mature American Citizens certified social security advisor. To submit a question, visit amacfoundation.org/programs/social-security-advisory or email email@example.com.