Social Security is one of America's most valued and important social programs, but unfortunately, it's facing a significant problem: The cost of the program is exceeding how much it's bringing in.
Given the deficit that Social Security had in 2024, should current and future retirees be concerned? For most current retirees, no. However, if you're a current worker or approaching retirement, it's an issue worth keeping an eye on, because potential changes to Social Security will eventually affect you.
Let's look at the $67 billion issue that Social Security is facing.
Image source: Getty Images.
How Social Security funding works
To better grasp Social Security's issue, it's important to understand how Social Security's funding works.
Social Security is primarily funded through payroll taxes. The current rate is 12.4%, with both employers and employees paying 6.2% each (self-employed people are responsible for the full 12.4%). This money is then put into the Social Security Trust Fund, which consists of two parts: The Old-Age and Survivors Insurance (OASI) Trust Fund, and the Disability Insurance (DI) Trust Fund.
The OASI program is responsible for paying benefits to retirees, their families, and survivors of deceased recipients. The DI program is responsible for paying benefits to disabled workers and their families.
In theory, working-age people pay into the system to support current retirees, with the understanding that other working-age people will do the same for them once they're in retirement.
Just how bad is the Social Security deficit?
The Social Security Administration's (SSA's) 2025 Social Security Trustees Report noted that the Social Security program cost $1.485 trillion in 2024, while only bringing in $1.418 trillion. That resulted in a $67 billion deficit for the year.
According to the report, the OASI trust fund could be depleted by 2033, at which point Social Security would only be able to pay 77% of its expected benefits. A recent study by the Senior Citizens League (TSCL) estimated that about 21.8 million retirees rely solely on Social Security for income. So a 23% drop in benefits is far from ideal.
At the current rate of depletion, the Social Security Trust Fund could be underfunded by more than $25 trillion through 2099. Without changes, Social Security would need to cut benefits by about 23% beginning in 2034.
U.S. Old-Age and Survivors Insurance Trust Fund Assets at End of Year data by YCharts.
What is causing the Social Security deficit?
There are a few factors contributing to the Social Security deficit, but here are four key ones:
- An influx of retirees: Baby boomers are retiring in large numbers without enough workers in the workforce replacing them (and paying into the Social Security program).
- People are living longer: You don't stop receiving Social Security until you pass away, so as people live longer, they collect benefits longer, increasing Social Security's costs.
- Income for the lower and middle classes is stagnant: Only income up to a certain amount is subject to Social Security payroll taxes ($176,100 in 2025). This means that as high-earners begin earning more, they're paying less of their income into the program.
- Less interest earned on reserves: Social Security reserves are put into Treasury bonds to earn interest. However, interest rates were historically low for a considerable period, limiting the amount of interest Social Security could earn on its reserves.
The good news is that this isn't the first time Social Security has faced funding issues, and the federal government was able to address the problem. The bad news is that it's going to take bipartisan government action to resolve the funding shortfall, and there haven't been many encouraging signs of this happening in the immediate future.
In the meantime, current workers should prepare for the worst and hope for the best. This could mean increasing contributions to retirement accounts, investing more actively, and preparing for Social Security to potentially account for a smaller portion of your retirement income than previously expected.
Regardless of what happens, it's always better to be overprepared than underprepared.
