For most Americans, Social Security isn't a program they could make do without. In each of the previous 23 years, pollster Gallup questioned retirees about their reliance on Social Security income and discovered that 80% to 90% require their monthly check, in some capacity, to meet their expenses.
Maintaining and/or strengthening Social Security's foundation should be a top priority for our elected officials in Washington, D.C. However, projections point to a worsening financial outlook for America's leading retirement program.
Image source: Getty Images.
Based on the latest report, the Old-Age and Survivors Insurance Trust Fund (OASI), which doles out monthly benefits to retired workers and survivor beneficiaries, is forecast to exhaust its asset reserves in 2033. This raises the question: Will Social Security payments end in eight years?
Let's take a closer at how Social Security got to where it is now, and then clearly answer whether current and future retirees should be concerned about their monthly benefit.
The OASI's asset reserves are slated to be gone by 2033
In each of the last 85 years (i.e., since the first retired-worker benefit was mailed), the Social Security Board of Trustees has issued a lengthy and detailed report of the program's financial health. It lays out how Social Security collected every dollar in the previous year, as well as tracks where each dollar ended up.
But what's often more valuable with the Trustees Report is analyzing the long-term (75-year) projections of the program's financial outlook. The Trustees' long-term outlook shifts based on fiscal and monetary policy changes, as well as demographic shifts (e.g., fertility rates, net migration, death rates, disability incidence rates, and so on). It's these ongoing demographic changes that are the primary source of Social Security's problems.
For 40 consecutive years, the Trustees Report has cautioned of a long-term unfunded obligation. Put another way, the Trustees foresee income collected in the 75 years following the release of a report as insufficient to cover outlays, which includes benefits and administrative expenses to oversee Social Security. As of the 2024 Trustees Report, this long-term funding deficit had climbed to $23.2 trillion.
What's even more worrisome is the aforementioned expected depletion of the OASI's asset reserves -- effectively the built-up income that's been collected, which hasn't been paid out as a benefit or been used for administrative expenses. The 2024 Trustees Report anticipates the OASI's asset reserves will be gone in 2033.
The OASI's asset reserves are expected to be gone in eight years. US Old-Age and Survivors Insurance Trust Fund Assets at End of Year data by YCharts.
Can Social Security go bankrupt or become insolvent?
The prevailing question is: Does the OASI need its asset reserves to remain solvent, or will Social Security be bankrupt and cease payments if this happens?
The clear-as-day answer is that Social Security cannot go bankrupt or become insolvent under the current funding structure. Although Social Security checks run the risk of being reduced in the future (a topic I'll touch on a bit later), there's no question Social Security will still exist in 2033 (and beyond), and be doling out payments to eligible beneficiaries.
To understand why Social Security can't go bankrupt or become insolvent, you first have to comprehend how the program is funded.
Social Security generates income three ways:
- The 12.4% payroll tax on earned income, which includes wages and salary up to $176,100 in 2025, but doesn't include investment income.
- The interest income earned on the OASI's and Disability Insurance Trust Fund's (DI's) asset reserves.
- The taxation of Social Security benefits for select recipients.
In 2023, the program collected $1.351 trillion in income, 91.3% of which came from the payroll tax. The remainder came from interest income and the taxation of benefits.
If the OASI's asset reserves were to be depleted, the only interest income would come from the DI fund. However, Social Security would still be generating its normal allotment of income from payroll taxes and the taxation of benefits. As long as people continue to work and pay their taxes, Social Security will always have income to disburse to eligible beneficiaries.
The only way this funding mechanism can change is if Congress were to amend the Social Security Act. Not only is it highly unlikely that lawmakers would risk disrupting the primary funding mechanism for Social Security, but any such amendments would require bipartisan cooperation to achieve the 60 votes needed in the Senate to amend the Social Security Act.
I say with confidence that Social Security isn't going bankrupt and it will be there for you when you retire.
Image source: Getty Images.
Here's what's really at stake for Social Security beneficiaries
While the Social Security program is in no danger of going bankrupt or disappearing, the existing payout schedule for beneficiaries, which includes annual cost-of-living adjustments (COLAs), is in danger of being altered in 2033.
According to the 2024 Trustees Report, if the OASI's asset reserves are exhausted by 2033, a sweeping benefit cut of up to 21% may be necessary for retired workers and survivors in order to sustain payouts through 2098 without any further reductions. Slashing benefits by 21% in eight years would be no walk in the park for those who rely on Social Security as their primary income source.
The silver lining here is that Congress has, historically, come to Social Security's rescue during the 11th hour.
In 1983, the program was in a similar situation to what it could be facing in 2033, if nothing is done. Without congressional action, Social Security was expected to exhaust its asset reserves during the year.
The Social Security Amendments of 1983 were passed by Congress and signed into law by then-President Ronald Reagan. The program's last sweeping bipartisan overhaul gradually increased the payroll tax on earned income and the full retirement age, as well as introduced the now-hated tax on benefits. It offered a blend of solutions that raised revenue and reduced long-term outlays.
Although common ground has been difficult to find on Capitol Hill, it's the ticket to strengthening Social Security and either minimizing or eliminating the need to reduce benefits for current and future retirees come 2033.
Regardless of the outcome, Social Security benefit payments will go on.
