Social Security Has a $67 Billion Problem. Should Current and Future Retirees Be Concerned?

Social Security is one of America's most valued and important social grams, but unfortunately, it's facing a significant blem: The cost of the gram is exceeding how much it's bringing in

For most current retirees, no

However, if you're a current worker or apaching retirement, it's an issue worth keeping an eye on, because potential changes to Social Security will eventually affect you

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How Social Security funding works To better grasp Social Security's issue, it's important to understand how Social Security's funding works

Social Security is primarily funded through payroll taxes

This money is then put into the Social Security Trust Fund, which consists of two parts: The Old-Age and Survivors Insurance (OASI) Trust Fund, and the Disability Insurance (DI) Trust Fund

The OASI gram is responsible for paying benefits to retirees, their families, and survivors of deceased recipients

The DI gram is responsible for paying benefits to disabled workers and their families

In theory, working-age people pay into the system to support current retirees, with the understanding that other working-age people will do the same for them once they're in retirement

Just how bad is the Social Security deficit

Old-Age and Survivors Insurance Trust Fund Assets at End of Year data by YCharts

What is causing the Social Security deficit

There are a few factors contributing to the Social Security deficit, but here are four key ones: An influx of retirees: Baby boomers are retiring in large numbers without enough workers in the workforce replacing them (and paying into the Social Security gram)

People are living longer: You don't stop receiving Social Security until you pass away, so as people longer, they collect benefits longer, increasing Social Security's costs

This means that as high-earners begin earning more, they're paying less of their income into the gram

Less interest earned on reserves: Social Security reserves are put into Treasury bonds to earn interest

However, interest rates were historically low for a considerable period, limiting the amount of interest Social Security could earn on its reserves

The good news is that this isn't the first time Social Security has faced funding issues, and the federal government was able to address the blem

The bad news is that it's going to take bipartisan government action to resolve the funding shortfall, and there haven't been many encouraging signs of this happening in the immediate future

In the meantime, current workers should prepare for the worst and hope for the best

This could mean increasing contributions to retirement accounts, more actively, and preparing for Social Security to potentially account for a smaller portion of your retirement income than previously expected

Regardless of what happens, it's always better to be overprepared than underprepared

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