2033
What is so significant about this year? It is the projected year* that the Social Security Trust Fund reserves will become depleted. Once that happens, ongoing income would be sufficient to cover about 77% of scheduled Social Security benefits, unless Congress takes action before then.
While the importance of Social Security income varies by individual, for most retirees it is a valuable source of income. Nearly nine out of 10 individuals age 65 or older currently receive Social Security. Additionally, for beneficiaries age 65 and older, Social Security provides half of total income for about four in ten beneficiaries and more than 90% of income for about one in seven beneficiaries.1
Social Security’s ability to pay benefits to current and future beneficiaries is determined by its revenue, costs, and trust fund reserves. Demographic factors are the primary driver of the program’s projected shortfall- specifically the aging of the U.S. population due to declining fertility rates and increasing life expectancy. Over time, this has resulted in a lower ratio of workers paying into the system relative to beneficiaries receiving benefits.2
Because the majority of Social Security revenue comes from payroll taxes, and since 2010 expenditures have exceeded non-interest income, the program has been drawing down its trust fund reserves.
In addition to reducing current and future benefits, there are several potential policy solutions to address the funding gap before benefit cuts occur. These may include:
• Increasing the payroll tax rate
• Raising or eliminating the wage cap subject to Social Security tax (currently $184,500)
• Increasing the full retirement age beyond 67 to reflect longer life expectancy
• Expanding how the trust fund is invested beyond U.S. Treasury securities
• Using general government revenues (borrowing or reallocating funds)
• Adopting a different inflation measure for Cost-of-Living Adjustments (COLAs)
• Increasing taxes on Social Security benefits
It is likely that a combination of each of these approaches along with others would be used to address the funding shortfall.
As part of the financial planning process, we review optimal Social Security claiming strategies for clients approaching or in retirement. We can also stress test the impact of potential reductions in Social Security benefits and evaluate how those changes could affect a client’s financial plan. From there, we identify adjustments that may help offset potential reductions.
While a Social Security funding shortfall is approaching, it is important for clients to understand that benefits are still expected to be paid, though potentially at reduced levels. Additionally, policymakers have multiple options available to help close the funding gap. We are here to help clients navigate this uncertainty.
* Some projections indicate 2032 as the depletion year
Sources:
¹ SSA.gov Fact Sheet, 2025
² Congress.gov, “Social Security’s Projected Shortfall: The Role of Demographic Factors,” June 5, 2025
Additional sources: SSA.gov, Congress.gov, Morningstar, Pfau, Wade (PhD), Retirement Planning Guidebook, 3rd Edition (2026); Kitces Webinar, October 2, 2024
This information presented in this blog is the opinion of the author and does not reflect the views of any other person or entity unless specified. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. The information provided is for informational purposes and should not be construed as advice. Advisory services offered through CJ Perry Financial, an investment adviser registered with the State of Pennsylvania.
