A new Social Security warning has been issued, stating that retirement checks may be smaller sooner than earlier anticipated. The latest 2025 Social Security Trustees Report confirms that the program’s future has worsened, and unless Congress takes necessary action, cuts to Social Security benefits are now larger and closer than previously forecasted.
Social Security Is Heading Toward Insolvency
The Social Security Old Age and Survivors Insurance (OASI) trust fund, which pays benefits to retirees and survivors, is projected to be depleted by 2033, just eight years away. When this happens, benefits will be automatically reduced by 23%, an increase from last year’s projection of a 21% cut. This increase indicates a growing financial shortfall.
This financial shortfall is a result of annual deficits since 2018, where the working population paying into the system has been unable to keep pace with the rapidly growing population of retirees. This imbalance is being driven by an increased rate of retirements among baby boomers, low birth rates, longer life expectancies, and a decline in legal immigration.
Bigger Cuts, Sooner
The Social Security outlook has further deteriorated this year (2025) following the enactment of the Social Security Fairness Act, which repealed the Windfall Elimination Provision and the Government Pension Offset. These changes will see about 3.2 million retirees receive increased benefits, thus draining more funds from the already struggling trust fund. Additionally, some retirees have been receiving payouts retroactively since 2024.
Another factor worsening the situation is income inequality. Only 82% of U.S. earnings were subject to Social Security tax in 2022, which is below the 90% threshold set in 1983. In addition to the stagnant workforce and inefficient policy changes, the funding shortfall has grown too large.
Medicare Isn’t Safe Either
Besides Social Security, Medicare is also expected to become insolvent soon. As Veronique de Rugy explains in her analysis, the Medicare Hospital Insurance Trust Fund is also projected to be insolvent by 2033. This will result in hospitals facing an 11% cut in Medicare reimbursements, adding more financial strain to the U.S. healthcare system and retirees who depend on it.
These changes are not hypothetical. These changes are not hypothetical; instead, they are automatic and will occur unless changes are made, even without legislation.
What Can Be Done
To prevent Social Security insolvency, Congress must:
- Cut benefits now by 27%,
- Raise the payroll tax from 12.4% to 16.05%, or
- Restructure benefits to focus on need-based support.
Why It Hasn’t Happened Yet
According to de Rugy, all these options are politically toxic because voters are against higher taxes, benefit reductions and raise of the retirement age therefore Congress does nothing. Instead, it makes it worse by enacting policies such as expanded tax breaks and Windfall benefits.
Meanwhile, other countries like Sweden, Germany, Canada, and New Zealand have made proactive changes such as raising retirement ages and capping payouts to avoid massive funding gaps.
Should You Claim Benefits Early?
Given this dire forecast, many people at the age of 62 are thinking of claiming their benefits as early as possible despite the risk of receiving lower benefits as compared to if one waited for full retirement age before claiming benefits.
Avoiding panic and waiting until full retirement age seems better off because one will be eligible to receive larger monthly benefit. Additionally Congress is likely to act at the last minute by raising taxes, increasing the retirement age or tapping general revenue. A combination of these options could preserve benefits for current retirees and those near retirement too.
What You Should Do Now
- Plan for lower benefits: It’s prudent to prepare for at least a 23% cut starting in 2033 if no action is taken.
- Delay retirement if you can: This boosts your future monthly checks.
- Increase personal savings: Relying solely on Social Security is no longer viable for future retirees.
- Stay informed and vote: Legislative decisions over the next few years will be critical.
Conclusion
It is clear that Social Security is not sustainable in its current form and therefore Congress should take the right action to save it. Failure to do so will see millions of retirees hit with smaller checks and this might affect economic stability for many beneficiaries and their households in a negative way.