It’s no secret that the Social Security trust funds are just a few years away from being insolvent. Although this has been known for years, lawmakers continue to kick the can down the road, not wanting to touch the controversial issue affecting retirees, who vote at high rates.
However, Congress cannot put this issue off forever, as the deadline keeps moving up. Social Security retirees just got bad news.
The current situation
Social Security pays benefits monthly to retirees, who can typically claim them as early as age 62.
In April, the average monthly check was $2,026. Many retirees rely on the program as a primary or supplemental source of income to help them cover daily expenses, making it vital for the 75 million total Americans who collect benefits in some capacity.
Image source: Getty Images.
Social Security has long been funded by payroll taxes. Employees and employers must each pay 6.2% of an employee’s salary for Social Security, while self-employed individuals must pay the full 12.4%. However, there is a limit to the amount of income that can be taxed for Social Security. That number is $184,500 this year.
Due to changing demographics and other trends, Social Security payroll taxes first failed to cover scheduled benefits starting in 2010.
The program then began tapping into Social Security’s rainy-day fund, the Old-Age and Survivors Insurance (OASI) Trust Fund, which is specifically for retirees, widows, and widowers, to cover the shortfall. But now, that source will soon be depleted.
According to the 2026 report from Social Security’s Board of Trustees, the OASI fund will be tapped toward the end of 2032, three months earlier than expected.
In their report, the Trustees cited several changes to their assumptions from last year. For instance, the assumed fertility rate per woman declined from 1.9 to 1.75, and lower immigration rates were also assumed.
Additionally, the report noted that President Donald Trump’s “big beautiful bill” not only made tax cuts first enacted in his first term permanent, but also added a senior tax deduction that will result in lower tax income from benefits.
What will happen if the trust funds are depleted?
Many mistakenly believe Social Security will cease to exist once OASI is depleted. But remember, the payroll taxes will still be coming in. According to the trustees’ report, once the OASI fund is depleted, payroll taxes will still cover 78% of scheduled benefits.
There is also another Social Security trust fund called the Disability Insurance (DI) Trust Fund, which funds disability benefits. In a situation where the OASI is actually depleted, Congress could approve a law combining the two funds (OASDI).
In this situation, OASDI’s combined funds, along with payroll taxes, would be able to fund scheduled benefits until the third quarter of 2034, which is actually the same projection made in the Trustees’ 2025 report.
Once the OASDI fund is depleted, the Trustees estimate that payroll taxes could continue to fund 83% of scheduled benefits.
While the situation is not good, I do expect Congress to step in at some point, even if it’s at the very last minute. A reduction in benefits could have significant adverse effects, as many retirees may not be able to afford vital costs, such as shelter, food, and healthcare.
Nonpartisan group The Senior Citizens League (TSCL) has already conducted numerous studies showing that since 2010, benefits have failed to keep pace with inflation, permanently eroding the purchasing power of retirees.
Naturally, Congress can never seem to agree on how to fix the program. Democrats have regularly floated ideas such as raising the income cap on Social Security taxes.
Republicans have talked about cuts, such as continuing to raise the retirement age at which retirees can collect full benefits.
Lawmakers may have to consider a combination of tax hikes and cuts to reach a compromise. But even in today’s ultra-partisan Congress, I do think an agreement will be made to avoid what many experts see as a catastrophic scenario.
