As Baby Boomers continue to enter retirement in record numbers, concerns about the future of Social Security are growing louder. With mounting headlines forecasting funding shortfalls and shifting demographics, the question arises: Should Baby Boomers genuinely be worried?

According to economists and financial planners, the answer is yes but with context. Social Security is not disappearing anytime soon, but the system faces real financial challenges that could impact future payouts. Here’s what you need to know.

The Financial Outlook: Not Bankrupt, But Strained

Social Security is currently funded through payroll taxes paid by workers and employers. Those funds are used to pay current retirees. However, due to demographic shifts, that balance is changing.

According to the Social Security Administration (SSA), the program’s trust funds which include the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds are projected to be depleted by 2035. If no changes are made, only about 80% of scheduled benefits will be payable at that time.

The reason for the shortfall? Baby Boomers those born between 1946 and 1964 are retiring in large numbers, and there aren’t enough workers entering the workforce to replace them. This means fewer people are paying into the system, while more are drawing benefits.

Rising Costs, Shrinking Value

Another concern is the rising cost of living, which continues to outpace the Cost of Living Adjustments (COLA) provided by Social Security. In 2023, Social Security benefits increased by 8.7%, the highest jump in four decades. However, inflation, especially in healthcare and housing, has still eroded retirees’ purchasing power.
SSA COLA Information

Experts warn that without updated methods to calculate COLA more accurately such as considering senior-specific expenses retirees may find their benefits buying less each year.

Baby Boomers Are Paying Attention

A recent survey by Newsweek found that 73% of Baby Boomers are worried about potential reductions to their Social Security benefits. Moreover, 85% of Americans across all age groups express similar concern, illustrating the widespread anxiety surrounding the future of the program.

For many Boomers, Social Security represents a key component of their retirement income. According to the SSA, it makes up at least 50% of income for about half of all married couples and up to 90% for many single retirees.

Possible Solutions on the Table

While some experts warn of cuts if Congress fails to act, several reform proposals have been floated to shore up the program:

• Raising the Full Retirement Age: This would reflect increased life expectancy and encourage longer work lives.
• Increasing the Payroll Tax Cap: Currently, only wages up to $168,600 (2024 cap) are taxed for Social Security. Raising or eliminating this cap could generate more revenue.
• Means-Testing Benefits: Higher-income retirees may receive reduced benefits under some reform proposals.
• COLA Reform: Adjusting how cost-of-living increases are calculated to better reflect inflation faced by seniors.

None of these changes are easy or politically simple, but many analysts agree that a combination of them could extend the program’s solvency.

What Experts Recommend Baby Boomers Do Now

While Congress debates potential fixes, financial planners are urging Boomers to prepare for all scenarios. Here are some key strategies:

1. Maximize Retirement Contributions: Contributing the maximum allowed to IRAs or 401(k)s can help reduce reliance on Social Security.
2. Diversify Retirement Income: In addition to Social Security, retirees should build income from savings, pensions, part-time work, or investments.
3. Delay Claiming Benefits: Waiting until age 70 to claim Social Security can increase benefits by up to 32%.
4. Work With a Financial Planner: Personalized advice can help retirees understand their unique situation and plan accordingly.

“Social Security should be part of your retirement strategy not the whole thing,” says Sarah Thompson, a certified financial planner in New York. “Diversifying your income is the best buffer against uncertainty.

Final Thought

While Social Security isn’t vanishing overnight, the program is undeniably facing serious long-term challenges. For Baby Boomers many of whom depend heavily on these benefits the key isn’t panic, but preparation.

Whether it’s working a bit longer, saving more aggressively, or pushing lawmakers for reform, now is the time to take control of your financial future. Social Security may remain a pillar of retirement but like any structure under stress, it’s wiser to reinforce it before cracks appear.