The trust funds that help pay Social Security benefits to millions of Americans are due to run out of money in less than a decade.
In an annual report released on Wednesday, trustees of the Social Security Administration (SSA) have said retirement benefit funds could be depleted by 2034, unchanged from last year’s prediction, while disability funds will remain solvent until 2099.
Social Security forms the backbone of retirement security for tens of millions of Americans, with the Social Security Administration (SSA) distributing monthly checks to some 70 million people.
Here is everything you need to know about the report, and what it means for the future of your benefits.
What Are the Trust Funds?
There are two main sources that help pay benefits. These are the Old-Age and Survivors Insurance (OASI) Trust Fund, which pays for retirement, spousal and survivor benefits, and the Disability Insurance (DI) Trust Fund, which endows programs like Supplemental Security Income (SSI) for disabled Americans.
The majority of benefit payments are funded by payroll taxes, income tax on Social Security benefits, and interest on trust-fund reserves; this is set at a rate of 6.2 percent for employees and companies, and 12.4 percent for self employed workers, up to the current threshold of $176,100 in earnings per year.
These funds are distinct and legally separate, but are often combined as “OASDI,” to reflect the financial health of Social Security. When put together, the total funds that pay benefits are now expected to be depleted in 2034—a year earlier than previously expected.
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What Happens When the Trust Funds Run Out?
The report outlines that, if nothing is done to shore up the funds, from 2033 onward, retirement, spousal, and survivor benefits will be payable only at 77 percent of current rates.
When combined, benefits would be reduced to 81 percent of current rates starting in 2034—a year earlier than previously thought.
Why Are Trust Funds Running Out?
The long-term outlook for the combined Social Security trust fund worsened this year due to three main factors, according to the trustees report.
First, the repeal of the Windfall Elimination Provision and Government Pension Offset, implemented by the passing of the Social Security Fairness Act in January, increased benefits for some workers, accelerating the fund’s depletion.
Second, the expected recovery in fertility rates was delayed by 10 years, now assumed to reach normal levels by 2050. In recent years, Social Security has faced paying out more benefits to older Americans while the pool of workers paying taxes is depleting, and fertility rates have also dropped, contributing to the problem.
Wednesday’s report still projects that the U.S. fertility rate will eventually rise to 1.9 children per woman, up from the current rate of 1.6. However, trustees now expect this shift to happen by 2050—10 years later than previously predicted.
Third, projections for the share of gross domestic product (GDP) going to worker wages were lowered, reducing expected payroll tax revenue, according to the report.
How Can It Be Fixed?
Improving the funding outlook for Social Security benefits requires action from lawmakers.
This is not an unfamiliar situation—the trust funds faced insolvency back in the early 1980s. Following an act of Congress, a range of changes were made to how Social Security is funded, including accelerating payroll tax increases, gradually raising the retirement age, and making a portion of Social Security benefits taxable.
More changes are being considered as the threat of insolvency looms again. Rhode Island Senator Sheldon Whitehouse and Representative Brendan Boyle of Pennsylvania, both Democrats, recently reintroduced the Medicare & Social Security Fair Share Act, which would impose payroll taxes on wages and investment income above $400,000.
Vermont Senator Bernie Sanders has made similar proposals, albeit implementing payroll taxes on income above $250,000. He has also advocated for officially combining OASI and DI funds.
Republicans, on the other hand, have supported the raising of the retirement age. In March 2024, prior to the presidential election, the Republican Study Committee, comprising 170 GOP lawmakers, published a budget proposal that would include “modest adjustments to the retirement age for future retirees to account for increases in life expectancy” to tackle the solvency issue.
Social Security advocacy groups have called for lawmakers to prioritize taking action.
“It is time to enact common-sense legislation to bring more revenue into Social Security,” Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare, said in a statement emailed to Newsweek. “Current and future seniors (nearly 50 percent of whom rely on their benefits for all or most of their income)—should not be asked to bear the cost of improving the program’s finances.”
“This report shows that Social Security is fully affordable, costing only about 6 percent of GDP at the end of the 21st century,” Nancy Altman, president of Social Security Works, said. “It has a modest funding shortfall, which is still years away. There is no question Congress will act to avert the shortfall, as it always has in the past. The question is what Congress will do.”
