There could be a reduction in profits. This is what you need to know.
When Social Security turns 90, Congress faces a financial deadline
Social Security has a cash flow issue. For years, agents have paid more profits than they would take via payroll tax.
Scripps News
Social Security benefits are a lifeline for millions of elderly people, and new research shows that the majority of Americans cannot be obtained without them.
According to a 2025 report from the Nationwide Retirement Institute, 61% of US adults collecting current Social Security benefits have admitted they will not survive financially if they miss even half of their monthly payments. Of those who have not yet received benefits but are hoping for them, 54% say the same thing.
Unfortunately, for many retirees, benefits cuts could be possible over the next decade. The reason is that you can do it in preparation.
Cuts may be on the table by 2034
One of the biggest issues facing Social Security is the depletion of two trust funds, the old age and survivors’ insurance (OASI) fund and the disability insurance (DI) fund.
In recent years, the Social Security Agency (SSA) has paid more profits than it earns. The program was funded primarily through payroll taxes from workers, and when baby boomers retire in large numbers, income from taxes was not sufficient to pay all benefits to older retirees.
To cover the deficit, SSA is withdrawing money from the trust fund. This is a short-term solution to avoid profit cuts for now, but these funds are quickly running out of money. If they are exhausted, SSAs will need to rely solely on payroll taxes and other sources of income to fund benefits.
According to the latest report from the SSA Board of Directors released earlier this year, the OASI and the DI Trust Fund are expected to run by 2034. If nothing changes from now on, the SSA can only pay around 81% of the scheduled benefits.
What does this mean to you?
If the trust fund is gone in 2034, benefits could be reduced by nearly 20%. However, this assumes that lawmakers will not come up with a solution before that.
Nothing has been agreed, but there are some suggestions on the table. A 2022 survey from the University of Maryland found that taxation on wealthy workers is one of the most popular and effective solutions, with 81% of both parties agreeing to this approach.
Currently, only income of up to $176,100 per year is subject to Social Security Tax. Some lawmakers also propose taxable wages of more than $400,000 a year, generating extra income for the program and reducing the amount SSA needs to withdraw from the trust fund.
Other lawmakers suggest raising the full retirement age or reducing the profits of higher earners. Both reduce social security spending. Again, these solutions are not set to stones yet. However, even if SSA can avoid profit reductions, program changes can affect you in other ways.
What you can do to prepare
The future of Social Security may be largely out of your control, but you can take steps to prepare for potential reductions.
- Delaying claims of merit: According to 2024 data from the Social Security Administration, the average retired worker collects about $807 more per month at age 70 than the age of 62. Delaying filing for a year or two can increase your profits in just a few hundred dollars a month, removing some of the potential future cuts.
- Consider a side job or passive income: Even if you’ve already received benefits, working for Social Security will help you increase your checks and strengthen your savings. Passive income streams can generate wealth longer in retirement and reduce reliance on benefits.
- Get creative by reducing your costs: You may have already exhausted all the ways you can reduce your daily expenses. But if you are serious about helping your money to last longer, a big lifestyle will change, such as moving to a more tax-friendly state or shrinking to a smaller home.
If none of these options work, or if you have already retired, the options may be more restrictive. But maintaining information is a powerful way to protect your finances. The more you learn about the social security situation and how it affects you, the more you can do to prepare.
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