Throughout the duration of your working career, a percentage of your earnings will be contributed towards the dedicated Social Security payroll tax. By paying this monthly tax contribution, you will, in essence, be securing the stability of your retirement income. It is a simple system in theory, you pay into the payroll tax during your working years, and later upon retirement, you claim back those contributions in the form of your Social Security benefits.
Because of the way that the Social Security program is set up, it can never go completely bankrupt. In recent years, however, it appears that the number of retirees is growing disproportionately faster than the number of younger people entering the workforce. As a result, the two major trust funds which supplement the payroll tax revenue are being relied on a bit more to pay out benefits. Consequently, as per the annual report from the Social Security Board of Trustees, one of the two major trust funds are now projected to become insolvent less than a decade from now.
As a result, many seniors are now claiming benefits as early as possible out of fear that the program will no longer be able to support them in the future. Here is what you need to know.
Social Security trustees estimates cuts of up to 23%
The Social Security program has three main sources of revenue: the dedicated Social Security payroll tax, the Old Age and Survivors Insurance (OASI) trust fund, and the Disability Insurance (DI) trust fund. According to the trustees’ estimates as per the annual report, the program continues to face financing issues and if Congress does not intervene soon, the OASI trust fund is projected to become insolvent as soon as 2033.
If the OASI trust fund is emptied, an automatic 23% cut will be triggered across all benefits. Alternatively, if the two trust funds are combined into one OASDI trust fund, the combined funds would only suffice until 2034. At this point, the remaining revenue in the program would only sufficiently cover 81% of all scheduled benefits — meaning a 19% cut will be triggered. However, “the two funds could not actually be combined unless there were a change in the law, but the combined projection of the two funds is frequently used to indicate the overall status of the Social Security program,” the trustees wrote.
Seniors are claiming benefits early
A new report from the Urban Institute has revealed that, “more seniors were filing early for Social Security in 2025 compared to 2024 amid a looming shortfall that could see payments slashed by 20 percent.”
To understand why an uptick in seniors filing early for Social Security is noteworthy, you have to first understand how retirement age impacts your benefits. The Social Security program has a Full Retirement Age in place and this is the age at which the senior will qualify to receive their full benefits, In 2026, the Full Retirement Age will be 67 years of age for those born in 1960 and later.
Social Security can, however, be claimed from age 62 but this is considered claiming early and as a result, you will be subject to a deduction in benefits of up to 30% until you reach your Full Retirement Age. In some cases, claiming early may be more beneficial to the retiree, for instance, if they have an illness which would reduce life expectancy. However, according to the findings in the Urban Institute’s report, the uptick in early claimants could be fueled by the uncertainty surrounding the changes at the Social Security Administration (SSA).
Lawmakers are currently debating their options in pursuit of finding a solution to prevent the projected shortfall, however, nothing has been decided for certain as yet. Amongst the proposed solutions was the option of increasing the Full Retirement Age further, or raising the maximum taxable earnings.