As we all know, Social Security is a vital source of income for millions of Americans, especially those who depend on it as their primary source of income. However, data from the latest yearly report from the Social Security Trustees shows a worrisome trend: the program’s finances are being depleted faster than they were originally predicted.
Reserves Could Run Dry by 2034
The latest Social Security Trustees report says the program’s main trust fund is on track to run out in 2034, a year sooner than previously expected. Payments won’t stop entirely, but unless Congress steps in, people could see their monthly benefits cut by about 25%. For those who count on Social Security to cover the basics, that kind of drop would hit hard.
This isn’t happening on its own. There is a combination of changing demographics and recent policy changes are speeding up the program’s financial troubles. Without quick action from lawmakers, millions of Americans could see their Social Security income take a serious hit.
Where does Social Security get its funding from?
Social Security gets its funds significantly from a payroll tax: 6.2% from employees and 6.2% from employers on income up to $176,100 in 2025. Self-employed individuals pay the full 12.4%. These tax contributions are sent into two trust funds managed by the U.S. Treasury: one for retirement and survivors (OASI), and another for disability insurance (DI).
Any surplus collected is invested in special government securities. However, as more benefits are being paid out than what’s coming in, the OASI trust fund is now expected to be exhausted by 2033. After that, it will only be able to pay around 77% of scheduled benefits. On the brighter side, the DI fund is not projected to run out within the next 75 years.
Why the Program Is Facing Insolvency
Social Security is under pressure and one of the major reasons is the wave of Baby Boomers hitting retirement. There are more people collecting benefits and there not sufficient workers paying money into the system, the math just isn’t adding up.
Another major blow came with the Social Security Fairness Act, passed in early 2025. It scrapped two rules that had long reduced benefits for certain public workers. As a result, more people now qualify for full payments, and the government owes billions in retroactive benefits.
Additionally, the Trustees report includes lower birthrates and slower workforce growth, both of which reduce the amount of payroll tax being collected. The result is a widening actuarial deficit or the gap between expected income and benefit obligations. This has now grown to 3.82% of taxable payroll, up from 3.50% in last year’s report.
How Can Social Security Be Saved?
To keep Social Security solvent beyond 2034, action is needed — and soon. According to the Trustees, two major options are on the table:
- Raise the payroll tax by 3.65%, shared between workers and employers.
- Mitigate all Social Security benefits immediately and permanently by 22.4%.
Alternatively, lawmakers could request for a blend of smaller tax increases and more modest benefit reductions. The longer action is delayed, however, the more extreme the fixes will need to be.
What Happens If Nothing Changes?
If Congress doesn’t step in soon, Social Security won’t disappear overnight but the impact will still be severe. Once the trust funds run dry in 2034, payroll taxes will keep covering about 81% of benefits. That means nearly a 20% cut for recipients, a big hit for anyone relying on a fixed income.
Bottom line: Social Security isn’t going away, but it’s under serious pressure. The longer lawmakers wait, the harder it’ll be to protect the people who need it most.