What the Social Security trust funds are and why they matter to you
Social Security has two separate trust funds: one for retirement and survivors' benefits, and one for disability benefits. These funds hold the money collected from payroll taxes and pay out benefits each month. Right now, both funds take in less money than they pay out, which means they are drawing down their reserves. When a fund's reserves run out — which the trustees project will happen for the retirement fund around 2033 and the disability fund around 2096 — the program can only pay benefits from incoming tax revenue, which would be roughly 80 percent of scheduled benefits unless Congress changes the law.
This does not mean Social Security will disappear. It means that without a change to the law, the program would automatically pay a lower percentage of promised benefits to everyone. The timing and the size of that reduction depend on how many people are working and paying taxes, how long people live, and how much Congress decides to change the rules.
Key Takeaways
- Social Security's trust funds are projected to run out of reserves in the 2030s and 2090s, but the program will still collect payroll taxes and pay reduced benefits after that point.
- A benefit reduction would affect everyone receiving Social Security — retirees, disabled workers, and survivors — unless Congress acts before the trust fund is depleted.
- Congress has several options to address the shortfall: raise payroll taxes, increase the retirement age, reduce benefits, change how benefits are calculated, or use some combination of these.
- The longer Congress waits to act, the larger and more sudden any change would have to be to fix the problem.
- Your current benefits are protected by law, but future benefit levels depend on decisions Congress makes in the coming years.
Why the trust funds are shrinking
Social Security is funded by a 12.4 percent payroll tax split between workers and employers. For decades, the program collected more in taxes than it paid out in benefits, and the surplus went into the trust funds. That changed around 2021, when the number of people collecting benefits grew faster than the number of people paying taxes.
This shift happened because the Baby Boom generation — a large group born between 1946 and 1964 — has been retiring. At the same time, birth rates have been lower, so there are fewer workers per retiree than there were 20 or 30 years ago. In 1960, there were about 5 workers for every retiree. Today there are about 3, and that ratio is expected to stay around 2.3 by 2035. With fewer workers paying in and more retirees drawing out, the trust funds have been paying out more than they collect.
The trust funds also earn interest on their reserves, which has helped slow the drawdown. But interest earnings are not enough to close the gap between what comes in and what goes out.
What happens when a trust fund runs out of money
When the retirement trust fund's reserves reach zero — projected for 2033 — the program will still collect payroll taxes from current workers. Those taxes will be enough to pay about 80 percent of scheduled benefits. The other 20 percent would not be paid unless Congress changes the law. This automatic reduction would apply to all beneficiaries: retirees, disabled workers, and survivors of deceased workers.
The disability trust fund is in better shape. It is projected to have reserves until around 2096, which gives Congress more time to address it. However, if Congress does not act on the retirement fund before 2033, it will eventually have to address the disability fund too, since both are part of the same system.
The exact percentage of benefits that could be paid after reserves run out depends on tax revenue at that time, which depends on how many people are working and earning wages. If fewer people are working or wages are lower, the percentage would be lower.
Options Congress could use to fix the shortfall
Congress has several ways to address the trust fund shortfall, and most proposals combine more than one approach:
- Raise the payroll tax rate. The current rate is 12.4 percent. Raising it would bring in more revenue. For example, raising it to 13.5 percent would close most of the long-term shortfall, but workers and employers would each pay more.
- Raise or eliminate the earnings cap. Right now, payroll taxes only apply to the first $168,600 of annual earnings (this amount changes each year). Raising or removing this cap would mean higher earners pay taxes on more of their income, bringing in more revenue.
- Increase the full retirement age. The age at which you can receive full benefits is currently 66 or 67 depending on your birth year. Raising it further would reduce lifetime benefits for future retirees, since they would have fewer years to collect.
- Change how benefits are calculated. Congress could reduce the benefit formula for higher earners, means-test benefits so wealthier retirees receive less, or change how cost-of-living adjustments work.
- Use general revenue. Congress could fund part of Social Security from general tax revenue instead of only payroll taxes, though this would require a change to how the program is financed.
Most policy experts say that a combination of changes — some tax increases, some benefit adjustments — would be less disruptive than relying on any single option.
Why timing matters for any fix
The longer Congress waits to act, the more abrupt and severe any change would have to be. If Congress acts now, the changes could be spread over many years and could be smaller. For example, a gradual payroll tax increase of 0.5 percent per year over several years would be less noticeable than a sudden 3 percent increase all at once.
If Congress waits until the trust fund is nearly depleted, it would have to make larger changes quickly, which would affect current beneficiaries more severely. Changes made now could also be phased in over time, so people nearing retirement could plan accordingly.
Congress has addressed trust fund shortfalls before. In 1983, after the Social Security trust funds nearly ran out, Congress passed a law that gradually raised the payroll tax, increased the full retirement age, and made some benefits taxable for higher-income beneficiaries. That fix kept the program solvent for 40 years.
What this means for your benefits
If you are already receiving Social Security, your current benefit amount is protected by law and cannot be reduced. However, if Congress does not act before the trust fund runs out, the program would pay a lower percentage of all scheduled benefits going forward, which would affect future payments.
If you are not yet receiving benefits, the changes Congress makes will affect how much you receive and when you can receive it. The earlier you are in your career, the more time you have to plan for whatever changes are made. If you are close to retirement, you may want to review your Social Security statement to understand your projected benefits under current law.
You can view your Social Security statement online at ssa.gov. The statement shows your earnings history and your projected benefits at different ages. It also includes a note about the trust fund situation.
Frequently Asked Questions
Will Social Security go away completely?
No. Social Security will continue to collect payroll taxes and pay benefits even after the trust fund reserves run out. The program would pay a reduced percentage of benefits unless Congress changes the law before that happens. Social Security is a permanent program created by federal law.
When exactly will the trust fund run out?
The trustees project the retirement trust fund will be depleted around 2033, but this date can shift by a year or two depending on economic conditions, life expectancy, and other factors. The trustees release updated projections each year. The disability trust fund is projected to last until around 2096.
Can Congress change Social Security without my permission?
Yes. Congress has the power to change Social Security rules, including the payroll tax rate, the retirement age, and how benefits are calculated. Changes would apply to future beneficiaries and sometimes to current beneficiaries, though current benefit amounts are usually protected.
What should I do now about the trust fund situation?
Review your Social Security statement at ssa.gov to understand your projected benefits. If you are close to retirement, consider how changes might affect your plans. If you are younger, you have time to adjust your retirement savings strategy based on whatever Congress decides.
Does the trust fund shortfall mean I should claim benefits early?
That depends on your personal situation, not on the trust fund timeline. Claiming early means a permanently lower monthly benefit. The trust fund projections do not change the math of when claiming makes sense for you individually.