Five big questions and answers about Social Security

You may be wondering whether it will still be there when you retire, whether it’s enough to live on, or how it works. Understanding the answers to these critical questions can help you make better financial decisions about when and how to use your hard-earned Social Security benefits. 

QUESTION 1

Will Social Security be there when I retire?

While Social Security faces funding challenges, it’s unlikely to disappear entirely. The program is funded through the payroll taxes you and others pay when employed. So even though the trust fund reserves may be depleted by the mid-2030s, ongoing tax revenue alone is expected to cover around 79% of benefits.

QUESTION 2

Will Social Security be all I need to retire?

Social Security was not designed to be the sole source of retirement income. According to the Social Security Administration (SSA), it may cover as much as 79% of pre-retirement income for very low earners while, for maximum earners, it can be expected to cover just 28%. For medium earners, Social Security replaces 43% of pre-retirement earnings. This is where other retirement accounts, personal savings, pensions, and other income sources are necessary to fill the gap. 

QUESTION 4

How does inflation impact Social Security?

Social Security benefits are adjusted annually through the Cost-of-Living Adjustment (COLA) to help keep up with inflation. COLA is based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). While this adjustment provides some protection, it may not fully match rising healthcare costs or other personal expenses. Learn more about COLA and how it affects your retirement income.

Building a retirement plan that accounts for inflation can help your savings grow alongside your needs, reducing your reliance on Social Security alone.

QUESTION 5

What happens to my Social Security benefits when I die?

Based on your earnings record, your spouse or dependents may be eligible for survivor benefits when you pass away. Spouses can receive benefits as early as age 60 (or 50 if disabled). Dependent children under age 18 (or up to 19 if still in high school) may also qualify.

Help your family understand these benefits and keep your earnings record accurate to maximize their potential support.

Social Security can provide critical financial support in retirement, but understanding its limitations and rules is key to making the most of it. You can create a more secure retirement plan by knowing how these benefits are affected by work, inflation, and life events and by supplementing Social Security with personal savings and other sources of income.