The constant worry that Social Security will run out by 2032 has many taxpayers wondering whether they’ll ever see the money they’ve contributed from every paycheck.
The Congressional Budget Office (CBO) released its 10-year budget and economic outlook for 2026 to 2036, which projects federal outlays in 2026 totaling $7.4 trillion, or 23.3% of GDP (gross domestic product). In relation to the economy, outlays remain near their 2026 level through 2028 and then rise, reaching 24.4% of GDP in 2036—a trend that is the result of greater spending on Social Security.
What does all this mean to you and me? “Outlays” represent actual payments on government obligations—in this case, Social Security payments to recipients.
The CBO is projecting that the Social Security Administration (SSA) can fulfill all of its payments, but questions still swirl about whether the SSA will run out of money and what would happen next.
“This is the big elephant in the room and is the question on many peoples’ minds,” Marcia Mantell, president of Mantell Retirement Consulting, tells Realtor.com®. “Social Security is not going bankrupt and cannot go bankrupt.”
She says the key is to understand how Social Security is funded, which will help homeowners and future retirees to prepare (aka budget wisely).
Start your day with all you need to know Morning Report delivers the latest news, videos, photos and more.
Mantell explains there are only three revenue streams which fund Social Security. “1) FICA/payroll taxes from most workers (this is paid by employers directly to Social Security); 2) taxation of benefits for many retired beneficiaries; and 3) interest on the reserve account. FICA represents about 90% of the funding,” says Mantell. “However, FICA taxes are not enough to cover retirees’ earned benefits.
“In the past, when there was extra (surplus) between revenue and payment to retirees, the extra was put into a ‘savings’ account or rainy day fund. That’s the reserve account. It’s that account that is now being tapped to pay our retirees, in addition to FICA revenue.”
Chad Cummings, attorney and accountant with Cummings & Cummings Law, agrees.
“The Social Security trust fund does not face immediate bankruptcy, but it does face medium-term insolvency. The distinction is important,” he tells Realtor.com.
“The 2024 Trustees Report projects the Old-Age and Survivors Insurance trust fund (what we colloquially call Social Security) will deplete its reserves by 2033,” Cummings says. “At that point, incoming payroll taxes will cover only about 79% of scheduled benefits. Congress would need to act to prevent an automatic 21% benefit cut. The program will still collect over $1 trillion per year in FICA taxes regardless of the trust fund balance.”
It will take an act of Congress to make any changes to fund Social Security, but it will also require the president’s signature.
“No president wants to be known as the one who ‘cut Social Security.’ It’s the third rail of politics,” Cummings adds.
It’s important to remember that Social Security should not be the only source of income to rely on during retirement, especially if you have a mortgage and other debt.
“In my firm, I tell clients to plan for receiving 75 cents on the dollar and treat any amount above that as a bonus,” says Cummings.
“Max out 401(k)s, IRAs, and consider annuities. Social Security should be seen as icing on the cake, not the cake itself,” advises Cummings.
Mantell agrees, noting that “all other income above Social Security needs to be created from each person’s personal assets—IRAs, 401(k)s, 403(b)s, savings, and investment accounts. You don’t want a ‘backup’ but rather a well-designed basket of accounts from which to create your income.
“If you are looking for another steady stream of reliable income, you can consider a fixed-income annuity. And, for those who own their own house, they may have access to that asset via HELOCs or reverse mortgages.”
Cummings says many clients who face the greatest danger are those earning between $50,000 and $90,000 per year and carry no employer-sponsored retirement plan and hold no IRA.
“At my firm in Florida, I see this pattern among self-employed contractors who opted out of SEP-IRA contributions to maximize take-home pay during their working years,” Cummings explains.
“They arrive at age 62 with a Social Security benefit of $1,800 per month and no other income source. After Medicare Part B premiums and taxes on benefits under IRC Section 86, that $1,800 functions closer to $1,400. At that point, there isn’t much we can do to remediate.”
