People line up outside the Social Security Administration office in San Francisco.<\/p>\n
Getty Images<\/p>\n
Social Security, the federal social insurance program that millions of Americans rely on for income, faces a shortfall in funding it counts on from its trust funds. However, this does not mean the program is going bankrupt or will be entirely unable to pay benefits.<\/p>\n
“There is no bankruptcy or collapse in the cards,” Stephen Nu\u00f1ez, director of stratification economics at the Roosevelt Institute, writes in new research titled, “‘Will Social Security run out?’ is the wrong question.”<\/p>\n
Social Security has faced funding woes before, and lawmakers have made changes to shore up its finances. In 1983, Congress passed legislation to raise the full retirement age and apply federal income taxes on benefits, which was expected to secure the program for 75 years.<\/p>\n
However, the projected shortfall is coming much sooner due to factors such as income inequality and the Great Recession. The trust funds, which are invested in Treasury securities, are excess money reserves that were not used to pay benefits. The fund dedicated to retirement benefits may run out by late 2032, according to the latest estimates from the Social Security Administration’s chief actuary.<\/p>\n
If the program reaches the depletion date without congressional action, beneficiaries may face an estimated 24% benefit cut. Benefits would still be payable, as the program would have money coming in from payroll taxes. The FICA payroll tax cap, which is adjusted each year, has not increased quickly enough to maintain the 90% tax coverage, resulting in less tax revenue for the program’s reserves.<\/p>\n
Income inequality has affected how much the program takes in from the FICA payroll tax, which is applied to earnings up to a certain cap. In 2026, that limit is $184,500. Earnings up to that amount are subject to a 6.2% payroll tax paid by workers and another 6.2% paid by their employers.<\/p>\n
It is now up to lawmakers to decide how Social Security’s shortfalls will be addressed, whether through tax increases, benefit cuts, or a combination of both. The soonest projected depletion date \u2014 2032 \u2014 means the next presidential election “could very well determine the future of the program,” Nu\u00f1ez said.<\/p>\n
Senate lawmakers who are elected this year will also be in office at that time. “Legislators are going to be forced to deal with Social Security, even though they have not wanted to,” Nu\u00f1ez said.<\/p>\n
<\/p>\n While today’s lawmakers have vowed to protect Social Security, their approach has largely meant doing nothing rather than tackling the tough reforms the program needs, Maya MacGuineas, president of the Committee for a Responsible Federal Budget, wrote in November.<\/p>\n The changes lawmakers make will determine how much Americans pay into Social Security and the amount of benefits they receive. “What’s going to matter the most is who’s at the table making those decisions when that time comes around,” Nu\u00f1ez said.<\/p>\nConclusion and Next Steps<\/h2>\n