This Social Security Surprise Could Upend Your Retirement Budget

Here's something that might surprise you as you plan for your retirement: You might have set up a my Social Security account at the Social Security Administration (SSA) website -- which is a smart thing for each of us to do, regardless of our age. By doing so, you will have been able to see estimates of your future benefits, depending on when you claim them.

It's smart to use those estimates as you plan for your retirement. But there's a possible big surprise around the corner -- and it's big enough to wreak havoc with your retirement if you're not prepared.

Image source: Getty Images.

The big Social Security surprise

So what's the big surprise? Well, it's that you might not get all the benefits you've earned in retirement. You might only get around 77% of them -- or less! So if you're expecting, say, $2,500 checks in your first year of collecting Social Security, you might end up with only $1,925. Surprising, right?

Here's why: As you probably know, Social Security works by collecting taxes from workers and using that money to pay retirees. The system has worked so well for many decades -- so well that it has long run a surplus, collecting more than it paid out.

But those good times are ending. Many people are living longer and retiring earlier, and the surplus is running dry because Social Security is paying out more than it collects.

Check out how the ratio of workers to Social Security beneficiaries has shrunk over time:

Data source: Social Security Administration.
*projected, in the 2025 Social Security Trustees report

If nothing is done to strengthen it, Social Security's trust funds' surplus will run out within a few years, resulting in benefits shrinking to around 77% of the amount due to beneficiaries. (Note that they won't go to zero, because workers will still be taxed on their earnings.)

What to do

That nasty surprise could be catastrophic for those counting on Social Security to survive. Many do, after all. Per the SSA, Social Security benefits make up nearly a third of the retirement income of those older than 65 -- and 90% or more of income for 12% of men and 15% of women older than 65.

Fortunately, there are multiple ways to fix Social Security. For example, the cap on payroll taxes could be increased or even eliminated. That's the sum beyond which your earnings are not taxed for Social Security. For 2026, it's $184,500 -- so anyone earning $190,000 -- or $153 million -- will only pay taxes to Social Security on the $184,500 of their income.

We can all hope that Congress takes action and strengthens Social Security before the surplus runs dry. But we shouldn't count on getting 100% of what we're doing, just in case Congress doesn't act. (It's a good idea to contact your representatives to let them know what you think about this issue.)

So plan for a smaller Social Security benefit, just in case, and beef up your other retirement income streams to help support you in the future.

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