'The thought of living to 100 terrifies me': Is Social Security a giant Ponzi scheme?

By Quentin Fottrell

There's already a demographic 'run' on Social Security

A fun fact about Generation X: We are apparently more stressed out than other generations.

Fear can lead us to do unexpected things.

It can push us toward panic selling, drive us to make wild assumptions about the world, and even prompt us to take a hard look at our own finances. We are subject to these impulses when we are looking for something or someone to blame.

A Moneyist reader honestly unpacked their fears: "The thought of living to 100 terrifies me more than dying. For me, the biggest fraud is telling people to wait until 70 to retire just to maximize their Social Security benefits - as if that's the only factor worth considering."

They continued: "I grew up in the 1980s, and the advice to never count on Social Security is sounding more and more like a warning than a prediction. The longer Congress waits to 'fix' the system, the harder it becomes to have any confidence that it will continue to exist."

They worry that people will rush to claim benefits at 62, the earliest age a person can do so, and be pushed out of the workforce by AI, leading to a "run on Social Security similar to the bank runs before the Great Depression," they added. "Long live the Ponzi!"

A Moneyist reader honestly unpacked their fears.

Social Security is not a Ponzi scheme. It was never intended to be a get-rich-quick scheme or a reward for outliving everyone else. It was designed to provide a meaningful measure of financial security when working is no longer an option.

But that does not mean people won't retire early through no fault of their own or lose their jobs due to AI. Some forecasters predict that AI will lead to the loss of 100 million jobs over the next decade - but potentially create even more.

I grew up in the 1980s too, and here's a fun fact about Generation X: The American Institute of Stress says we are apparently more stressed out than other generations. The main reason for that, researchers theorize, is because we are worried about falling short on our retirement goals.

The reader is essentially asking five questions: (1) Will fear trigger a Social Security crisis? (2) Is Social Security a Ponzi scheme? (3) Why sacrifice your 60s to get a bigger check at 70? (4) Can you really count on Social Security? And (5) Is AI disrupting employment forever?

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Answering the reader's questions

(1) To answer the reader's questions in order: Do not get carried away with 1930s-era prophecies of doom. A run on a bank involves a large number of people withdrawing their money and, if the bank cannot meet those withdrawals, even an otherwise solvent institution can fail.

(2) Social Security is a social-insurance program funded by workers and employers to provide support in retirement, prevent vulnerable people from falling into poverty and avert another Great Depression. It is at risk of a shortfall in funding, not annihilation.

(3) You can claim at 62, or wait until your FRA of 67, when your monthly benefit will be 30% higher than if you claimed at 62. Waiting until 70 increases your benefit by another 8% a year for each year you delay beyond 67.

Social Security is at risk of a shortfall, not annihilation.

If you decide to keep working, you may wish to delay claiming Social Security because you expect to live well into our 80s and 90s, can afford to wait for the larger check, or because you don't want your benefits to be reduced by the earnings test.

If you are already collecting Social Security and you make more than $24,480 in 2026, $1 is deducted from your benefits for every $2 you earn over that limit. Social Security recalculates benefits at full retirement age to account for months in which your benefits were withheld.

(4) The decision to wait depends on whether you think it's worth doing without that check in exchange for a larger payout later on and whether you can afford to wait. Some people will claim it because they fear for Social Security's future. Others will die before they ever claim.

(5) More than 50% of people already use AI at work, according to Gallup polls. That tells us a few things: AI is revolutionizing the way people do their jobs, and it's creating efficiencies for employees and employers, leading both to job loss and to improved productivity.

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Why we have Social Security

Unlike a Ponzi scheme, Social Security is a transparent social-insurance program. It is financed primarily by payroll taxes collected from workers and employers, with trust-fund reserves invested in special-issue U.S. Treasury securities.

Social Security was created in 1935 in response to the Great Depression and not intended to maximize investment returns. It is a social safety net to protect you against the financial hardships of old age and disability, and to provide benefits to eligible surviving family members.

There are two separate funds: the Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund. Their reserves are invested in special-issue U.S. Treasury securities, backed by the federal government.

Stocks have generated higher returns, with greater risk.

Of course, stocks have historically generated higher returns, but those returns come with considerably greater risk. The stock market has reached new heights in 2026, and with that growth comes confidence.

In the runup to the stock-market crash of 1929, people borrowed money to buy stocks and confidence turned into fever - and, ultimately, disaster. Consider how close the United States may have come to another economic catastrophe during the COVID-19 pandemic.

It requires little imagination to see how much worse things might have been without the economic guardrails already in place. That, my friends, is what Social Security was designed to address: protecting people from the dire consequences of economic disaster.

Yes, some people do claim Social Security benefits early due to fears about the program's viability. But Social Security takes the opposite approach to a Ponzi scheme: It values stability, security and peace of mind over recklessness, madcap investments and promises of riches.

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Social Security's funding crisis

So what about this imminent funding crisis? The Congressional Budget Office said earlier this year that the Old-Age and Survivors Insurance Trust Fund is projected to be exhausted in 2032. Congress has in the past adjusted payroll-tax allocations between the trust funds.

The Bipartisan Policy Center, a Washington, D.C.-based think tank, released a report in June that said the Old-Age and Survivors Insurance Trust Fund is projected to be depleted in 2032. At that point, incoming revenue would cover just 78% of scheduled benefits.

Without congressional action, those shortfalls would mean reductions in benefits. "The program's long-run outlook worsened significantly this year," it said. The 75-year shortfall has risen to approximately $30 trillion - up from $26 trillion last year.

There is already a demographic "run" on Social Security. "An aging population is a major contributor to the problem," the think tank added. The ratio of workers to beneficiaries has dropped from 5-to-1 in 1960 to 2.9-to-1 today and is projected to fall to 2.2-to-1 by the 2070s.

Social Security values stability and peace of mind.

The Old-Age and Survivors Insurance Trust Fund pays monthly Social Security retirement benefits to eligible retired workers and their families. Eligibility requires a sufficient work history and earned work credits - typically 40 credits, or about 10 years of work.

The Social Security Disability Insurance program provides cash benefits to disabled workers and their eligible dependents. Both trust funds are funded through payroll taxes under the Federal Insurance Contributions Act and the Self-Employment Contributions Act.

The Social Security Disability Insurance Trust Fund is projected to remain solvent until 2100, the end of the board of trustees' 75-year projection period, but the Old-Age and Survivors Insurance Trust Fund, under current estimates, won't have enough to pay full benefits in 2032.

We are encouraged to delay our dream life, save more, work longer and maximize our retirement contributions until our required minimum distributions kick in. Still, the price of financial security should not be spending our 60s worrying about our 70s, 80s and 90s, and beyond.

Keep calm and carry on working, if you can, and invest in your retirement.

Related: My 93-year-old father changed his will at the 11th hour, leaving my brother his entire $500,000 estate. Can I challenge it?

Check out The Moneyist's private Facebook group, where members help answer life's thorniest money issues. Post your questions, weigh in on the latest Moneyist columns or email The Moneyist at qfottrell@marketwatch.com.

More columns from Quentin Fottrell:

'It feels like he's quietly building a separate life': My husband inherited $500,000, but he refuses to spend it on our home

Two months after my father's funeral, my stepmother asked me to repay his $40,000 wedding gift. Should I do what she says?

'It seems bizarre': We're in our 80s with $950,000 in traditional IRAs. Why is our adviser pushing Roth conversions?

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11-10-26 0515ET