Have you ever said or heard someone say, “I’ll never get the money back that I paid into Social Security!”? Or, “I wonder how many years it will take me to just get back the money I paid into Social Security?” Usually, these questions are followed by the irreversible decision to take Social Security early. So, before you do that, read to the end of this article.
Now, to begin to answer the questions above, we have to know what paying into Social Security looks like. If you receive a paycheck, you will see an employee tax for OASDI (Old Age, Survivors, and Disability Insurance) listed on your pay statement. This is what most of us refer to as Social Security tax, i.e. what we are paying into the system.
Let’s look at a hypothetical example
The Social Security full retirement age (FRA) for those born between 1954 and 1960 increases by 2 months per year born. So for those born in 1954, the full retirement age is 66 and for those born in 1960 and later, the FRA is 67. For the purposes of our example, we are going to look at someone who was born in 1959 and reached full retirement age in 2025.
Mary was born February 7, 1959. She got a high paying job straight out of school at age 22 such that her salary has equaled the maximum subject to the OASDI tax since 1981. She retired in December of 2025 at her FRA of 66 and 10 months and began receiving Social Security benefits in January of 2026.
As far as her employee contribution rate from 1981 to 1990, it increased from 5.35% to 6.2%. Since 1990, the employee contribution rate has been 6.2%. The only exceptions were in 2011 and 2012 when Congress approved a temporary rate reduction to 4.2% as part of the Great Recession tax relief package. Mary’s maximum earnings subject to OASDI taxes of 5.35% to 6.2% (or 4.2% in 2011 and 2012) would have increased from $29,700 in 1981 to $176,100 in 2025. You can see the table here. This means Mary would have paid $240,796 in OASDI taxes. The maximum FRA benefit for 2026 is $4,152 per month or $49,824 per year. Assuming no cost of living adjustments, she will recover the taxes she paid in 4.83 years, before she reaches age 72, and the benefit continues for the remainder of her life.
OK, that’s pretty good, but what if instead of paying OASDI taxes, Mary put the same amount into an investment account each year, earning 5% annually. At retirement, Mary would have had $637,425. For this analysis, the investment account will continue to make 5% with an annual withdrawal of $49,824 (Social Security Benefit) with a 1% annual cost of living adjustment (COLA). Her investment account is depleted around her 85th birthday.
That looks pretty good; you might say even better than Social Security. However, it depends on making a 5% return every year for 63 years. It also depends on Mary consistently saving the required amount each and every year and not touching it until her age 66 and 10 months. Both of those could be big ifs.
But wait! Mary has been married to Cal for 38 years, and he has been a stay-at-home husband and father most of those years. He is also age 66 and 10 months, born in 1959, but has very few years of Social Security earnings. Although he has not paid into Social Security, he is eligible for a spousal benefit on Mary’s account of one-half of her FRA benefit. That’s another $24,912 per year, bringing the total annual benefit of Social Security to $74,736. Including the spousal benefit (1% COLA) in the analysis, the investment account runs out by Mary’s age 77. That’s not great if Mary lives longer.
Also, if Mary dies at age 77 and Cal is still alive, he will receive Mary’s full Social Security benefit for the rest of his life. That’s a pretty good deal! While not everyone earns as much as Mary, the basic conclusion is often the same: if you live a long life, you’ll likely receive more from Social Security than you paid in. Delaying benefits can shorten the time it takes to recover your contributions because your monthly benefit is larger. And while a private investment account may look attractive on paper, it cannot easily match Social Security’s combination of lifetime income, inflation protection, spousal benefits, and survivor benefits.
Will Social Security even exist when I retire?
There is a lot of speculation about Social Security’s solvency in the media. One important thing to remember is that challenges to the Social Security system do not equate to a total failure of the system. In June 2025, the Social Security Board of Trustees’ annual report on the state of Social Security Trust funds projected that the trust fund’s combined asset reserves for retirement and disability benefits will be depleted in 2033. BUT, that doesn’t mean there won’t be benefits! The continuing payroll tax income would be sufficient to pay 77% of scheduled benefits in 2033 and 69% by 2099.
Of course, this can change at any point in the future. Issues that could cause the trust funds to be depleted earlier and potentially reduce payments going forward include the following:
- Payment of Social Security benefits are dependent on current payroll taxes paid by both employers and employees. High unemployment and underemployment reduce the taxes available for current payments.
- Older unemployed and underemployed workers might decide or be forced to retire and claim benefits earlier than planned, increasing the funds needed.
- The Federal Reserve could drop interest rates, reducing the income from bonds held in the trust fund reserves.
However, there are equally as many potential solutions to extend the life of Social Security. Some of those include:
- Extending the full retirement age (FRA) again, such as was done by President Ronald Reagan in 1983. One year extension of the FRA for those not on Social Security bought us 50 years.
- Removing the wage cap and taxing all earnings at the 12.4% tax or simply increasing substantially the wages being taxed.
- “Means testing” the benefit so that those with higher incomes see a reduction in what they receive. Were this to happen, Roth conversions now become more valuable.
These and many others along with combinations of the options above would allow us to continue to see Social Security as an income source for years to come.
As you can see, a number of unknowns exist regarding the future of Social Security. Included in our financial planning services to clients, we analyze the optimum Social Security strategy (combined with pensions if applicable and other savings) for your specific needs.
Click here to contact us if you would like some help with your Social Security planning. We’re here to help!
