A Quick Word of Caution About Social Security

Is Social Security Going to Run Out?

You may hear news reports about the financial health of the Social Security system, and it’s natural to feel concerned. The reality is that, according to the program’s trustees, Social Security is not projected to “run out.” It is funded by ongoing payroll taxes from today’s workers. The projections do show that, if Congress does nothing, the trust funds could be depleted in the 2030s. At that point, the system would still be able to pay a large portion—around 80%—of promised benefits from ongoing tax revenue. While a reduction is serious, it is not the same as the program going bankrupt. Historically, Congress has always acted to shore up the system’s finances, and it is widely expected they will do so again.

How Does a Pension Affect My Social Security?

If you worked for a government agency (federal, state, or local) where you did not pay Social Security taxes, your Social Security benefit might be affected by two provisions: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). The WEP can reduce your own retirement benefit, while the GPO can reduce your spousal or survivor benefit. These rules are complex, so if you have a pension from non-covered employment, it is very important to speak with the SSA directly to understand how your benefits will be calculated.