Social Security's Solvency Crisis

Hi Everyone. In today’s article we’ll be taking a look at the ongoing issue of Social Security’s long-term solvency and what that means for today’s retirees and tomorrow’s.

How Social Security works

First, let’s look at how Social Security is designed to work. Most Americans pay into Social Security with every paycheck via payroll taxes, but the taxes don’t exactly go into a nest egg they’ll collect from upon retirement. Instead, Social Security is primarily a pay-as-you-go program: Today’s workers are paying for today’s retirees’ benefits via these payroll taxes. Both employers and employees pay 6.2% on wages earned under the Federal Insurance Contributions Act (FICA), up to an annual limit. Money left over from this is taken from taxes and added to the Social Security Trust Fund and invested to create interest. For years, when baby boomers were in their working years and actively paying into Social Security, there was a surplus. However, baby boomers are now starting to retire, and they’re retiring at a much greater rate than new workers are entering the workforce. As a result, there are less payroll taxes being paid than benefits being distributed. When will Social Security “run out”? Each year, the Social Security Trustees release an annual report highlighting the long-term financial status of the country’s Social Security program. Recently, these reports have shown that if Congress doesn’t act, Social Security’s two trust funds will run dry in 2035. This doesn’t mean Social Security will run out and no benefits will be paid. But if Congress doesn’t act, Social Security will only be able to pay out about 75-80% of promised benefits from its payroll tax revenue. That would trigger an immediate, automatic reduction in benefits for millions of retirees who depend on the program to pay for food, housing, utilities, healthcare, and other basic living expenses. Some experts have the ability to make up the difference, but for millions of retirees, that won’t be the case.

Why can’t Social Security pay all promised benefits?

There are a number of reasons. Americans are living longer than they did when Social Security was first enacted in 1935. Back then, the average life expectancy was roughly 62 years old. That meant few people were collecting Social Security benefits for very long. This was partly by design — early Social Security benefits were tied to the average worker’s lifespan so the program would theoretically balance out. But the average life expectancy is now above 78 years and rising. Couple longer life expectancies with falling birthrates and there aren’t enough workers paying into Social Security to keep up with the amount going out. Keep in mind that from 1960 to about 2000, there were about 5 workers paying into Social Security for every beneficiary collecting a paycheck. Now, that number is roughly 3 to 1. Not only are baby boomers living longer, but higher wage growth has been concentrated among the highest earners. Keep in mind that payroll taxes only apply to income earned up to $170,140. Income earned above that level doesn’t count towards Social Security’s payroll tax, which means more and more wages are not subject to Social Security taxes every year.

Where do we go from here?

Lawmakers have been fairly tepid in their proposals to fix Social Security. They’ve proposed raising or eliminating the cap on taxable wages. Others have proposed increasing the retirement age gradually. Fixing Social Security isn’t as simple as wanting to “raise the caps” or “lower the caps.” Dozens of permutations of changes have been proposed and each come with tradeoffs. Where does this leave local communities? While Social Security is an individual benefit that most seniors rely on for at least some portion of their retirement income, it also plays a huge role in community economics. Think about all of the retiree neighbors you have that pay for groceries and other services with Social Security benefits. Not only does keeping Social Security whole help those retirees, but it also helps the community as a whole by keeping dollars flowing to local businesses. Learn More: Social Security Administration, “Social Security Board of Trustees: Projection for Combined Trust Funds Remains Consistent with Prior Year,” press release, June 9, 2026.

References

https://www.ssa.gov/news/en/press/releases/2026-06-09.html Congressional Research Service, “Social Security: Selected Findings of the 2025 Annual Report,” Congress.gov, June 25, 2025. https://www.congress.gov/crs-product/IF13045 Center on Budget and Policy Priorities, “What the 2025 Trustees’ Report Shows About Social Security,” July 2, 2025. https://www.cbpp.org/research/social-security/what-the-2025-trustees-report-shows-about-social-security Opinion, The Washington Post. “A Missed Opportunity to Save Social Security.” Washington Post, July 21, 2026. https://www.washingtonpost.com/opinions/2026/07/21/missed-opportunity-save-social-security/