The financial future of the more than 70 million Americans who receive Social Security benefits is slightly more secure than anticipated: The trust fund reserves used to pay beneficiaries are projected to become insolvent in 2035, a year later than previously projected, according to the agency’s annual trustees report, released May 6, 2024.
Social Security will still exist after 2035, according to the report. But without congressional action, retirees will only receive 83% of their full benefits.
Preventing that shortfall would likely involve trimming benefits or increasing the Social Security payroll tax.
Will Social Security run out?
How is Social Security financed?
Social Security is funded through a payroll deduction: Employees and employers each pay 6.2% of the tax, adding up to 12.4% in total. (Self-employed individuals pay the entire 12.4% themselves.)
In tax year 2024, the tax is applied to the first $168,600 of your income. That cap is increasing to the first $176,100 of your income in tax year 2025.
When you contribute to Social Security, the money doesn’t go directly into your account: Workers pay into a fund that pays for current retirees’ benefits.
For every dollar you pay, 85 cents goes towards the Social Security trust fund, according to the Social Security Administration. The remaining 15 cents goes into a separate fund that pays benefits to people with disabilities and their families.
According to the May 2024 trustees’ report, the Social Security Administration will deplete its reserves in 2035. Without congressional action, the fund will then only be able to pay out 83% of full benefits.
Why is Social Security important?
Social Security’s Cost of Living Adjustment
In addition to meeting its current obligations, the Social Security fund must also account for the annual Cost of Living Adjustment (COLA), which modifies the payments recipients receive to account for inflation.
The adjustment is based on the change in the Labor Department’s Consumer Price Index from the third quarter of the prior year to the third quarter of the current year.
The COLA for 2025 is 2.5%, which works out to an average increase of $49 per check. Most recipients will see their first bigger check in January 2025.
What can Congress do about Social Security?
Changes to Social Security benefits and revenue sources need to come from Congress. There are different strategies, but most involve one or more of the following:
- Cutting Social Security benefits
- Increasing the payroll tax (or the income limit)
- Increasing the age at which taxpayers can claim benefits
The last time Social Security faced a reserve deficit was in 1983. Bipartisan legislation increased the full retirement age from 65 to 67 and instituted an income tax on Social Security benefits.
How to supplement your Social Security check
When it comes to retirement saving, start as early as possible. Experts recommend setting aside between 10% and 15% of your paycheck, but you can start small and increase over time. If you have outstanding credit card bills or student loans, clearing those debts may take precedence.
401(k) plan
A 401(k is a retirement investment account sponsored by an employer. Contributions are tax-deferred, so they can lower your taxable income the year they’re made and give you more to invest. If your company matches 401(k)s, maxing out your contributions should be the priority. Many employers will match between 2% and 6% of an employee’s annual salary.
IRA
An individual Retirement account (IRA) is another investment option, but it’s not connected to your employer and typically has more options.
Like a 401(k), a traditional IRA is tax-deferred and contributions can be tax-deductible, funds in the account grow tax-free, but withdrawals are subject to income tax when you take distributions. We tapped Charles Schwab and Betterment as two of the best IRAs.
Charles Schwab
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Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing through Schwab One® Brokerage Account. Automated investing through Schwab Intelligent Portfolios® requires a $5,000 minimum deposit
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Fees
Fees may vary depending on the investment vehicle selected. Schwab One® Brokerage Account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for over 4,000 mutual funds and a $0.65 fee per options contract
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Bonus
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Investment vehicles
Robo-advisor: Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Inherited and Custodial IRAs; plus, a Personal Choice Retirement Account® (PCRA) Brokerage and trading: Schwab One® Brokerage Account, Brokerage Account + Specialized Platforms and Support for Trading, Schwab Global Account™, Schwab Organization Account and Schwab Trading Powered by Ameritrade™
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Investment options
Stocks, bonds, mutual funds, CDs and ETFs
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Educational resources
Extensive retirement planning tools
Terms apply.
Betterment
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Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. For example, Betterment doesn’t require clients to maintain a minimum investment account balance, but there is a ACH deposit minimum of $10. Premium Investing requires a $100,000 minimum balance.
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Fees
Fees may vary depending on the investment vehicle selected, account balances, etc. Click here for details.
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Investment vehicles
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Investment options
Stocks, bonds, ETFs and cash
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Educational resources
Betterment offers retirement and other education materials
Terms apply. Does not apply to crypto asset portfolios.
A Roth IRA is an after-tax account, so you don’t have to pay taxes on your gains later. Ally Invest and Wealthfront rank among the best options for Roth IRAs.
There are also robo-advisor services that can build a portfolio for you based on your risk tolerance and time horizon and rebalance as you get closer to retirement. Top robo-advisors include E-Trade and SoFi.
E*TRADE
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Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open an E*TRADE brokerage account; minimum $500 deposit to invest in robo-advisor platform Core Portfolios
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Fees
Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF and options trades; zero transaction fees for over 4,400 mutual funds; robo-advisor Core Portfolios charges 0.30% annual advisory fee
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Investment vehicles
Robo-advisor: E*TRADE Core Portfolios IRA: E*TRADE Traditional, Roth, Rollover, Beneficiary, SEP and SIMPLE IRAs, IRA for Minors and E*TRADE Complete™ IRA Brokerage and trading: E*TRADE Trading Other: E*TRADE Coverdell ESA (Education Savings Account), Custodial Account for minors and small business retirement plans
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Investment options
Stocks, bonds, mutual funds, CDs, ETFs, options and futures
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Educational resources
Educational library includes in-depth articles and videos for any type of investor
Terms apply.
SoFi Invest®
On SoFi’s secure site
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Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active or automated investing, or to participate in IPOs. $5 minimum to own a fractional share of a company.
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Fees
Fees may vary depending on the investment vehicle selected. Active investing has zero commission fees for trading stocks and ETFs (exchange and fund management fees may apply). Automated investing has zero management fees
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Bonus
Download the SoFi app and get up to $1,000 when you open an Active SoFi Invest® Brokerage Account. SoFi covers up to $75 of any transfer fees your brokerage may charge when you transfer an account to SoFi
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Investment vehicles
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Investment options
Stocks, bonds, ETFs, fractional shares and IPO participation
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Educational resources
Investors can create a personal watchlist that follows their stocks to stay up to date and receive the latest investing news
Terms apply.
FAQs
How much is the average Social Security check?
As of January 2024, the average monthly Social Security check is $1,907. Thanks to the 2.5% COLA, that will increase to $1,968 in January 2025.
When will Social Security run out?
According to the May 2024 Social Security trustees report, the fund reserves that help pay for Social Security benefits will be depleted in 2035. Without congressional intervention, retirees would then only be able to receive 83% of their full benefits.
When can I start receiving Social Security?
Full Social Security benefits are available at age 67. You can start to receive benefits as early as 62, but the amount will be less. If you turn 62 in 2024, for example, your benefit would be about 30% lower than if you waited until you turned 67.
Can I draw Social Security and still work full-time?
You can receive Social Security retirement benefits and work full-time. If you are younger than the full retirement age of 67 and earn more than the yearly earnings limit, however, your benefits will be reduced.
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