For many of the nearly 53 million retired workers who receive a monthly Social Security benefit, this income is indispensable. In 2023, the Social Security program pulled 22 million people above the federal poverty line, including 16.3 million adults aged 65 and older. Further, it's helped lower the federal poverty rate for those 65 and older, from an estimated 37.3% without the program to 10.1% with Social Security income (as of 2023), based on an analysis by the Center on Budget and Policy Priorities.
Despite the foundational role Social Security plays in the financial well-being of retired workers, this program is on anything but stable ground. Let's examine how America's leading retirement program got into this mess and lay out the updated timeline for when benefit cuts are expected to take place.
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Social Security benefit cuts are forecast sooner than you realize
Every year since the first Social Security benefit check was mailed out in 1940, the Social Security Board of Trustees has published a report that intricately details the financial health of the program. This report tracks every dollar collected in income during the previous year and documents where every dollar is spent.
But what tends to garner the most attention is the Trustees' long-term forecast, which is defined as the 75 years following the publishing of a report. The Trustees take into account an assortment of fiscal and monetary policy changes, as well as demographic shifts, to estimate how financially sound Social Security will be over the long run.
Shortly after the bipartisan Social Security Amendments of 1983 were signed into law, the Trustees Report pointed to long-term trouble. Every report since 1985 has cautioned of a long-term funding shortfall. In simple terms, the estimated income to be collected over the 75 years following the release of a report is projected to be insufficient to cover program outlays, which include benefits (plus annual cost-of-living adjustments, or COLAs) and, to a far lesser extent, the administrative costs to oversee Social Security.
The 2025 Social Security Board of Trustees Report was issued less than two weeks ago, and it estimates the long-term unfunded obligation has ballooned to $25.1 trillion through 2099. While this is a daunting figure, it's not the most pressing problem for Social Security or the program's beneficiaries.
The OASI's asset reserves are projected to be depleted by 2033. US Old-Age and Survivors Insurance Trust Fund Assets at End of Year data by YCharts.
The glaring issue is the forecast for the Old-Age and Survivors Insurance (OASI) trust fund, which is responsible for dishing out monthly benefits to retired workers and survivors of deceased workers.
In 2020, the OASI's asset reserves expanded by $7.4 billion to $2.812 trillion, which is just shy of its all-time high of $2.82 trillion (set in 2017). Every year since then, the OASI has outlaid more in capital than it's collected in income. The latest Trustees Report points to this outflow accelerating in the coming years, from a documented $103.2 billion outflow in 2024 to an estimated $441.9 billion outflow from the OASI in 2032. By 2033, the OASI's asset reserves are expected to be completely exhausted.
The silver lining here is that the OASI isn't required to have a cent in its asset reserves to continue doling out benefits to eligible retired workers and survivors of deceased workers. The 12.4% payroll tax on earned income generates the bulk of income collected by Social Security, which means payments will continue as long as Americans keep working and paying their taxes. In short, there's no danger of bankruptcy or insolvency for current or future generations of retirees.
But the 2025 Social Security Board of Trustees Report does indicate that the existing payout schedule, inclusive of COLAs, is unsustainable beyond 2033. If nothing is done to reform Social Security, OASI benefits may need to be cut by 23% in just eight years, which is a steeper reduction than was forecast in the previous Trustees Report.
Image source: Getty Images.
What's to blame for Social Security's shaky foundation?
Here's the prevailing question on the minds of current and future beneficiaries: How did Social Security get into this mess?
What can be said with concrete certainty is that the notions of Congress "stealing" funds and undocumented migrants receiving traditional Social Security benefits are both completely false and nothing more than internet myths. Every cent of Social Security's trust funds is accounted for and updated monthly online, and both legal and undocumented migrants are a financial benefit to the Social Security program.
Rather, Social Security's shaky foundation can be boiled down to seven variables, some of which are more apparent than others:
- Baby boomers retiring: As baby boomers leave the workforce in greater numbers, there simply aren't enough new workers to replace them. This has led to a steady decline in the worker-to-beneficiary ratio.
- Increased longevity: When the first Social Security retired-worker benefit was mailed in January 1940, the average life expectancy in this country was about 63 years. In 2023, the average life expectancy stood at 78.4 years, according to mortality data from the Centers for Disease Control and Prevention (CDC). Social Security wasn't designed to pay benefits to the average retiree for close to two decades.
- Rising income inequality: In 1983, approximately 90% of all earned income (wages and salaries, but not investment income) was subject to Social Security's 12.4% payroll tax. But as of 2023, only 83% of earned income was applicable to the payroll tax. This shows that wages and salaries for high earners are increasing at a faster pace than the National Average Wage Index, which is what controls the upper bound of the taxable earnings cap associated with the payroll tax.
- A record-low fertility rate: According to the CDC, the U.S. fertility rate (projected births per woman over their lifetime) hit a record low in 2023. Couples are waiting longer to get married and have children, with some clearly concerned about the economics of bringing a child into the world. If low birth rates persist, it'll further weigh on an already challenged worker-to-beneficiary ratio.
- A sizable decline in legal net migration into the U.S.: Another culprit has been the sizable drop-off in legal net migration into the U.S. since 1997. Social Security counts on younger workers migrating to the U.S. and contributing via the payroll tax for decades before one day earning a retirement benefit of their own. Fewer legal migrants equate to less payroll tax being collected.
- Fed monetary policy: The nation's central bank deserves a piece of the blame, as well. A period of historically low interest rates throughout the 2010s sent Treasury bond yields plummeting. Social Security's asset reserves are required by law to be invested in special-issue, interest-bearing, government bonds. When yields plunged, so did Social Security's ability to generate meaningful interest income.
- Congressional inaction: Lawmakers are to blame for Social Security's woes, but not for the mythical belief that they've stolen funds. Rather, the inability of Republicans and Democrats to find common ground is kicking the can on an important issue, widening the long-term funding deficit, and making an eventual fix even costlier for working Americans.
Make no mistake about it, there are solutions from both sides of the political aisle that would strengthen Social Security. But with 60 votes needed in the Senate to amend the Social Security Act, there's no chance of fortifying this all-important social program until lawmakers from both parties find common ground. All the while, benefit cuts are now just an estimated eight years away.
