The Social Security program provides millions of Americans with a stable and consistent source of income during their retirement years. The Social Security Act was first signed into law almost a century ago in 1935. However, according to the latest annual report from Social Security trustees, it appears that a major trust fund will be exhausted before the program can reach its hundredth birthday if Congress makes no changes.
The projected shortfall comes as no surprise to the agency because more money has been going out than coming for at least the last four years. The matter does appear to be more pressing now, however, since the latest annual report from trustees has estimated the shortfall date to be 2034 — a year earlier than the projected date estimated in the previous year’s report.
Here is what you need to know.
Social Security funding issues
According to the Social Security Administration (SSA) website, “Social Security is financed through a dedicated payroll tax. Employers and employees each pay 6.2 percent of wages up to the taxable maximum of $176,100 (in 2025), while the self-employed pay 12.4 percent.”
One of several driving forces causing financial strain on the program is the ratio of workers to retirees. The has been a boom of baby boomers entering retirement as of late, however, the current workforce does not appear to be gaining enough new employees to match this. For the time being, the difference is being covered by the Social Security trust funds, however, if this trend continues and there is no other intervention from Congress, the shortfall projected in the report from the trustees will likely come to pass. Not to mention that the projected shortfall date has already moved up a full year.
Another source of pressure on the SSA has been the new Social Security Fairness Act that came into effect earlier this year. The Fairness Act effectively repealed the provisions of the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) which caused a cohort of around 3 million public sector employees to have their benefits reduced — or in some cases eliminated entirely — due to alternate pensions being provided to them by their employers.
With the Fairness Act coming into effect, the impacted beneficiaries will have seen a bump to their benefit amounts, with some even receiving around $1,000 more monthly. Whilst a benefit bump will be gladly welcomed by any beneficiary, it will increase the financial strain faced by what appears to be an already strained program. It is potentially the impact of the Social Security Fairness Act that resulted in the shortfall estimates moving up a year.
“If the OASI Trust Fund and the DI Trust Fund projections were combined, the resulting projected fund (designated OASDI) would be able to pay 100 percent of total scheduled benefits until 2034, one year earlier than reported last year,” as per the report.
Will Social Security change?
Previously, when the Social Security program was faced with this sort of financial pressure, Congress introduced taxes on Social Security benefits as an additional source of income rather than cutting a portion of benefit amounts. Another potential fix for the issue is to increase the Social Security payroll tax rate which currently stands at 6.2%. Alternatively, the ceiling on income subject to Social Security tax could also be heightened from $176,100 (in 2025) thereby allowing for those in a wealthier cohort to increase their contributions to the program.
“Congress must act to protect and strengthen the Social Security that Americans have earned and paid into throughout their working lives. More than 69 million Americans rely on Social Security today and as America’s population ages, the stability of this vital program only becomes more important,” Myechia Minter-Jordan, CEO of AARP, shared in a statement.
In a message to the public, the trustees also pleaded the following, “Lawmakers have many options for changes that would reduce or eliminate the long-term financing shortfalls. Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.”