The latest annual report from the Social Security Administration (SSA) trustees confirms that the Old-Age and Survivors Insurance (OASI) Trust Fund is projected to run out of reserves by 2034, leaving retirees facing an automatic 23% reduction in benefits unless lawmakers take decisive action.
This alarming forecast underscores the deepening challenges facing America’s retirement safety net, which supports tens of millions of seniors. While the projection remains unchanged from last year, the SSA’s message is clear: the program’s long-term stability is becoming more fragile.
Combined trust funds face an 81% funding gap in a decade
The combined reserves of the Old-Age, Survivors, and Disability Insurance (OASDI) programs—which together support roughly 70 million Americans—are expected to cover only 81% of scheduled benefits beginning in 2034. That means millions of seniors could see their monthly checks shrink dramatically, unless reforms are enacted in time.
What’s behind Social Security’s worsening outlook?
Several key factors are contributing to the impending shortfall:
1. Social Security Fairness Act adds pressure
The Social Security Fairness Act, passed in early 2024, eliminated the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). These provisions had previously reduced benefits for some public sector workers. Repealing them has increased overall benefit obligations, straining the OASI fund more than expected.
2. Declining birth rates reduce future payroll contributors
The U.S. fertility rate, currently at 1.6 children per woman, remains well below the replacement level of 2.1. It is not expected to reach even 1.9 until 2050, ten years later than earlier estimates. With fewer children born today, the future workforce—and thus payroll tax base—is shrinking, threatening the program’s sustainability.
3. Lower wage growth hits payroll tax revenue
The trustees also revised downward the expected share of worker wages in GDP, resulting in reduced projections for payroll tax collections. Since Social Security draws nearly 90% of its income from payroll taxes, weaker wage growth could severely limit funding.
Where does the money come from—and where does it go?
According to 2024 data, the program’s revenue and expenditures are broken down as follows:
Source of Social Security Funds
- Payroll Taxes (FICA/SECA): 89.6%
- Taxation of Benefits: 4.6%
- Interest on Trust Fund Reserves: 5.8%
How Social Security Funds Are Spent
- Retirement and Survivors Benefits: 79.9%
- Disability Benefits: 13.5%
- Administrative Costs: 0.7%
What happens if Congress does nothing?
Even if the trust fund runs out in 2034, Social Security would still collect payroll taxes. However, that revenue would only be sufficient to pay about 77% of scheduled retirement, survivor, and spousal benefits.
Disability Insurance (DI) benefits, however, would remain fully funded into the next century. The DI Trust Fund is projected to remain solvent until at least 2099, providing some stability for disabled Americans.
Still, the consequences of inaction would be immense—especially for the 50% of seniors who rely on Social Security for most or all of their income, according to SSA data.
Lawmakers propose competing solutions to close the gap
There is no shortage of ideas in Congress—but consensus remains elusive.
Democratic proposals focus on higher-income earners
Democrats are pushing the Social Security Fair Share Act, which would impose payroll taxes on income above \$400,000. Senator Bernie Sanders has offered an alternative: tax earnings above \$250,000 and merge the OASI and DI trust funds to create more flexibility.
Republican solutions target the retirement age
Republicans argue that increased life expectancy justifies gradually raising the retirement age. The Republican Study Committee’s 2024 budget includes this measure as part of a larger effort to reform federal entitlement programs.
Advocacy groups warn: The time to act is now
Experts and advocates are sounding the alarm. Max Richtman, president of the National Committee to Preserve Social Security and Medicare, emphasized urgency:
“The time to strengthen Social Security is now. Delay only increases the risk to millions of current and future retirees.”
Without legislative action, the fate of Social Security remains uncertain. Whether through increased taxes, delayed retirement, or structural reform, Congress must act decisively to protect a program that is central to the financial security of millions of Americans.