For decades, Social Security has been a cornerstone of retirement planning for millions of Americans. But with ongoing concerns about the program’s financial stability, many are asking: Will Social Security run out?
The short answer: No, but without action from Congress, retirees may see reduced benefits in the future.
When Will Social Security Funds Be Depleted?
According to the Social Security Board of Trustees, the trust fund reserves that help pay benefits are expected to be depleted by 2035. This means that, without intervention, the program will only be able to pay 83% of scheduled benefits starting in 2035.
Despite this projection, Social Security will not disappear. Payroll taxes from workers and employers will continue funding the system, ensuring that retirees still receive at least two-thirds of their benefits even after 2041.
How Is Social Security Funded?
Social Security is primarily funded through payroll taxes:
- Employees and employers each contribute 6.2% of wages (a total of 12.4%).
- Self-employed individuals pay the full 12.4% themselves.
These contributions go into two trust funds:
- The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivor benefits.
- The Disability Insurance (DI) Trust Fund, which provides benefits to disabled workers and their families.
As of 2025, payroll taxes apply to income up to $176,100, meaning higher earners contribute more to the system.
Why Is Social Security Facing a Shortfall?
Several factors are putting strain on Social Security’s finances:
- Aging Population
- More retirees are collecting benefits than ever before.
- The ratio of workers to retirees has dropped, meaning fewer people are paying into the system compared to those receiving benefits.
- Longer Life Expectancy
- Americans are living longer, which means they collect benefits for more years than previous generations.
- Lower Birth Rates
- Fewer workers entering the workforce means less revenue for Social Security.
- Rising Cost of Living Adjustments (COLA)
- Social Security benefits are inflation-protected, which means payments increase annually to keep up with the cost of living. The 2025 COLA increase is 2.5%, adding an average of $49 per monthly check.
What Can Congress Do to Fix Social Security?
To ensure long-term solvency, Congress has several options:
✔ Increase the Payroll Tax
- Raising the 12.4% payroll tax slightly could help cover the funding gap.
- Some proposals suggest removing the income cap, so high earners continue paying taxes on all of their wages.
✔ Adjust Benefits
- One option is raising the full retirement age beyond 67.
- Another is reducing benefits for higher-income retirees.
✔ Reallocate Government Funds
- Congress could redirect federal revenue to help keep Social Security fully funded for future generations.
The last major reform occurred in 1983, when bipartisan legislation increased the full retirement age and introduced taxes on Social Security benefits.
Will Social Security Exist in 2050?
Yes. Social Security will still be around in 2050, but the amount retirees receive may be lower if Congress does not act.
Even if the trust fund reserves run out, payroll taxes will still cover the majority of benefits—about 75% to 83%—well into the future. However, without changes, retirees could face automatic benefit cuts if the system remains underfunded.
How to Prepare for Potential Benefit Reductions
If you’re worried about reduced Social Security payments, consider supplementing your retirement savings:
Maximize Your 401(k)
- Many employers offer a 401(k) match, which is essentially free money for retirement.
Open an IRA
- Traditional IRAs allow tax-deferred savings, while Roth IRAs offer tax-free withdrawals in retirement.
Build Personal Savings
- Experts recommend having at least 10-15% of your income saved for retirement.
Bottom Line: Social Security Isn’t Running Out, But It Needs Reform
While Social Security is facing financial challenges, it will not disappear. Congress has time to implement changes that can preserve full benefits for future retirees.
If you’re planning for retirement, diversifying your savings and staying informed about potential policy changes will help you navigate any adjustments to Social Security in the years ahead.
This content is brought to you by the FingerLakes1.com Team. Support our mission by visiting www.patreon.com/fl1 or learn how you send us your local content here.