Tens of millions of seniors count on Social Security to provide retirement income, and among those without a pension or personal savings, that dependency tends to be even stronger. But Social Security is grappling with its share of financial woes, and those troubles may, in fact, come to a head as early as the upcoming year.

Social Security's serious shortfall

Starting in 2021, Social Security is expected to spend more money keeping up with its obligations than it collects in revenue. The reason? Social Security gets the bulk of its revenue from payroll taxes -- the ones that apply to earnings of up to a certain limit that changes annually (for 2020, it's $137,700). But as baby boomers leave the workforce in droves and start drawing on their own benefits, the program will suddenly be in a tight spot where its obligations exceed its revenue.

Loose stack of Social Security cards

Image source: Getty Images.

Now the good news is that Social Security has trust funds it can tap to close that gap. But those funds will only last for so long. This past April, the program's Trustees projected that those funds may run dry come 2035, but given the events of the past six months -- namely, record-high unemployment -- that timeline could be pushed up. Once there's no more money in the Social Security trust funds, benefit cuts may be inevitable.

Can lawmakers fix Social Security?

Social Security serves as a financial lifeline for many, many seniors, and so sitting back and just allowing benefit cuts to happen would be imprudent on the part of lawmakers. The problem, however, is that there doesn't seem to be a great solution to fixing the problem at hand.

At a basic level, Social Security needs a way to generate more revenue to avoid a scenario where it's forced to spend less on benefits, and in that regard, raising the annual wage cap is an oft-discussed solution. As mentioned earlier, Social Security taxes cease to apply once wages exceed $137,700. By increasing that earnings cap, or even eliminating it altogether, the program can boost its incoming revenue and potentially avoid having to slash benefits in the not-so-distant future.

But let's stop for a minute and think about who that change would most impact. That's right: higher earners -- those who wield a fair amount of political power and are unlikely to accept that news graciously. As such, it's not as good a solution as it might seem to be.

Another option is to raise full retirement age, or the age at which seniors are entitled to collect their monthly benefit in full. For anyone born in 1960 or later, that age is 67, but some lawmakers have argued that raising it is reasonable given the way life expectancies have shifted. Delaying full retirement age would also serve the purpose of bringing in more revenue for Social Security, as many people would then be forced to continue working and forking over payroll taxes on their income. But critics of this solution argue that it's particularly unfair to lower-income seniors, who are less likely to live a longer lifespan than higher earners.

As such, things are at a standstill with regard to saving Social Security, and so current and future recipients alike may need to gear up for benefit cuts. Of course, the hope is that lawmakers will prevent that from happening, but given the way Democrats and Republicans have struggled to come to terms on something as essential as a second stimulus bill, it's doubtful they'll have an easy time figuring out how to dig Social Security out of its impending hole.