If Santa Claus asked a retiree what they wanted for Christmas, the reply might be for monthly Social Security checks to keep coming.

For some retirees, that income can feel like a much-needed delivery from Santa.

So, I empathize with those who fear for the future of Social Security. They think it will dry up, leading them into poverty.

Time to Worry?

Unfortunately, this Grinch-like thinking is common, particularly among younger workers. A 2018 study from the Transamerica Center for Retirement Studies indicated 83 percent of Generation X workers and 80 percent of Millennials don’t think Social Security will be there for them in retirement.

I know it’s the Christmas season, but that is a serious lump of coal!

It’s true that Social Security has run into trouble and could again in the future. In fact, the latest Trustees Report said that this year is the first time since 1982 that Social Security will spend more on benefits than it collects in revenue.

Demographics are one reason. There are more older beneficiaries than younger workers feeding the system, and people are living longer than they did decades ago.

Then there’s congressional inaction on Social Security funding reform. The writing has been on the wall for a long time, but the government has done little about it.

You Must Believe

When you combine a changing society and government inaction, it’s not surprising people think the program will implode and dissolve.

But I’m here to deliver a gift.

I’m not Santa. This gift isn’t a toy.

It’s fact-based information on why you should believe Social Security will continue to be around, even if nothing changes.

The Funding Behind Social Security

To understand why Social Security will persevere, it’s important to know its three primary funding mechanisms.

The first is interest on the program’s $2.89 trillion in excess cash. When you hear Grinches say Social Security is running out of money, they mean excess cash. Lack of reform is the No. 1 threat to this revenue stream.

The second source of funding is the “payroll tax.” Employees pay 15.3 percent of income to the program, half of which is covered by employers. This is the largest revenue source for Social Security, accounting for nearly 88 percent of all revenue in 2017 (about $873.6 billion).

Lastly, the taxes collected on benefits also help fund Social Security, to the tune of $37.9 billion in 2017. These taxes were implemented in 1984, have increased since, and are unlikely to go away.

Program Longevity

The way Social Security is funded is why the program will not go bankrupt.

If the excess cash disappears, so will the interest it generates. But Congress can halt that, if it chooses to do so.

Regardless, most of the program’s revenue comes from taxes on earnings.

Currently, unemployment is at historical lows and wages are increasing. These are encouraging signs. They mean Social Security’s primary revenue stream is strong and should be for some time. Add in the tax on benefits and it’s clear the program’s funding stands on solid ground.

As a result, benefits should continue for many decades at least. And if important reforms take shape, the program will only get stronger.

But that doesn’t mean Social Security won’t change. We may see benefit decreases. The Trustees Report I mentioned said an across-the-board cut of 21 percent may be necessary if nothing changes.

The bottom line is, while the program may not look the same as today, it will be around to provide benefits for retirees — even today’s youngest workers.

Social Security and You

I’m asked all the time, “What will Social Security look like for me?”

It depends.

Timing matters. And any benefits you earned should be considered in the larger context of your entire retirement situation.

If your “financial stocking” isn’t as full as you’d like, don’t look to Santa. What you need is help from a qualified financial professional.

Social Security can be tricky. A financial professional can help guide the way, especially amongst uncertainty.

Isn’t there a reindeer famous for that?

It worked for Santa, and it could for you too.

Holly Peterson is the owner of Elite Retirement Strategies and a former radio show host. You can find her online at eliteretirementstrategies.com or by calling 208-252-4345.