Social Security needs help to continue paying promised benefits.
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Social Security is in trouble, but it’s not going bankrupt and it’s not going away in the near future. That’s an important conclusion from the 2026 OASDI Trustees Report that was released on June 9.
The Social Security OASDI Trust Funds are projected to be depleted in the third quarter of 2034; at that time, about 83% of benefits can still be paid to beneficiaries. This percentage declines gradually to 62% by 2100.
By the way, for those of you interested, OASDI stands for Old-Age, Survivors, and Disability Insurance program, and it’s the official name for Social Security.
Many people mistakenly think that if the trust funds are depleted, Social Security would go bankrupt and no benefits would be paid. The reality is that there are two sources of funding for Social Security benefits: the ongoing FICA taxes paid each year by current workers and the OASDI Trust Funds. Even if the trust funds are depleted, workers will still be paying FICA taxes, which would be able to pay for about 83% of total benefits in 2034.
Of course, a 17% reduction in benefits would be bad news for most retirees, but they won’t get nothing. Social Security would still be collecting taxes from then-current workers and paying benefits to then-current retirees and beneficiaries.
The Devil Is In The Details
Like many complex systems, there are many nuances and details that you might want to know to truly understand the Social Security program’s finances.
First, the choice of words is critical. Don’t confuse insolvency with bankruptcy. The OASDI Trustees report is careful to state that the program is considered solvent if it can pay all its scheduled benefits with scheduled financing. Using that definition, the program would clearly not be solvent if it cannot pay all scheduled benefits in 2034. But it still wouldn’t be bankrupt.
Second, there are actually two trust funds: the OASI Trust Fund for retirement and survivor benefits and the DI Trust Fund for disability benefits. The OASI Fund is estimated to be depleted in 2032, whereas the DI Fund is estimated to be able to last the entire 75 years of the forecast period. The results described previously are for the two funds combined, which is a common way to measure the financial strength of the two programs. However, it would take an act of Congress to officially combine the two funds, which is likely if it’s absolutely necessary..
Third, Social Security’s actuaries make many assumptions over a 75-year period when assessing the solvency of the program. These assumptions include information about:
- fertility (the numbers of future workers being born),
- death rates of retirees and beneficiaries,
- the ages when workers retire,
- immigration rates (immigrants also pay Social Security taxes),
- growth in the Consumer Price Index and future salaries earned by workers,
- interest rates, and
- incidence of disability.
Obviously, the Social Security actuaries don’t have a crystal ball that precisely guarantees future values in each and every one of these assumptions. Future experience with any of these assumptions could turn out differently from the assumptions, and the actual future strength of Social Security could be better or worse than the results described here.
Hard Choices Are Needed To Make Social Security Solvent
Social Security would be forecasted to be solvent for 75 years if:
- the FICA payroll tax rate was increased from 12.4% to 16.65% in January 2026, or
- benefits for current retirees and future beneficiaries were reduced by 25.2% in January 2026, or
- benefits weren’t reduced for retirees but were reduced by 30.3% in January 2026 but only for future retirees and beneficiaries, or
- an equivalent combination of tax rate increases and benefit reductions was enacted.
Obviously tax increases or benefit reductions wouldn’t be popular decisions, but nevertheless, that’s what it will take to make Social Security solvent.
The longer Congress waits to act, the more severe the necessary fixes will be. For example, if Congress waits until 2034 to act, then the estimated tax rate in 2034 to make the program solvent would need to be 17.3%, not 16.65%. Similarly, the necessary benefit reduction for current and future beneficiaries would need to be 28.5%, not 25.2%.
The sooner our political leaders make the necessary compromises with these hard choices, the better we all will be.
