The news never seems to lack headlines predicting the doom of the Social Security program. Is there any real risk of you not getting any money when you retire?

How it Works

The Social Security Act of 1935 established a new government agency called the Social Security Administration. Each time you receive a paycheck, money is deducted to go towards Social Security. When you retire, you get chunks of that money back every month.

The Act also established the Medicare health insurance program.

How It’s Funded

Social Security retirement benefits come from two sources. The first source is revenue from paycheck deductions and taxes that go towards the Social Security Administration. When revenue is high enough to cover all of the costs of paying retirement benefits, the program is considered to be in a healthy state. How is the program funded when revenue is not high enough to cover expenses?

The Social Security Act also established two trust funds that can be used as a last resort when revenue for the program is not high enough. Those trust funds are the latest reason for the program making it into the headlines.

2034…Doomsday?

It was recently announced that the two trust funds will be empty by 2034. That does not mean that the benefits of the program will then come to a screeching halt. It does mean that the program will be more reliant than ever on income from paycheck deductions and taxes.

So, what does this all really mean for someone who expects to retire in the 2030s? Although there’s no sound reason for thinking that Social Security benefits will be nonexistent by then, it can’t hurt to invest in personal retirement savings options, such as a 401k, Roth IRA, or good old-fashioned savings account.