There have been many longstanding concerns about the declining health of the nation’s Social Security fund. Any U.S. taxpayer should be concerned — very concerned. The latest government report is showing that Social Security is on track to deplete the fund that pays the nation’s retirement benefits by late 2032. Things keep getting worse regarding the fund’s depletion because the trustees just last year signaled that the fund would face depletion in 2033.
Oggonomics cares about Social Security. Every tax-paying American should care about Social Security as well. We all pay for future Social Security benefits via taxes over the course of our entire work life. And many of us pay far more into the funds than we will ever receive back in benefits, even without adjusting for inflation and pay raises.
On a personal note, this hits home directly and in a very pointed way. At age 56 this year, yours truly will reach the minimum retirement age in 2032 to 2033 — almost exactly at the same time this depletion is expected to hit. Deciding on early or delayed retirement should depend on multiple issues which are not yet determined due to many unknown factors at the present time.
When the public reads that the Social Security fund will be fully depleted, it probably sounds like future Social Security payouts will vanish. The silver lining is that this is not quite the case.
At the present time, if the Old-Age and Survivors Insurance (OASI) Trust Fund pays 100% of its scheduled benefits through the end of 2032, the fresh SSA forecast is that the continuing program income will be sufficient to pay 78% of total scheduled benefits after depletion.
The tax-paying public has every right to be angry about this continued erosion of Social Security. Washington D.C. has had decades to prepare for this ultimate depletion. It was no secret that the Baby Boomers were going to represent the largest drain of the fund in history. It was also no secret that Congress and the SSA could have moved to change the investing structure to allow the funds to invest (at least partially) in the equity market.
Please do not ever forget one of the key Oggonomics mantras:
If your plan is just to depend on the government to take care of you later in life, you probably will not like how the government takes care of you.
One of the blames in this latest report is being placed on lower revenues coming in as the result of President Trump’s new tax law. That tax law change allows senior citizens an extra deduction to reduce taxes owed on benefits for millions of Social Security recipients. This is posed as a temporary additional standard deduction for taxpayers over age 65. There are some other issues that are to blame as well in this latest report:
- declining fertility rates will lower tax revenues
- immigration is lowering tax revenues.
As the number of workers who pay into the system has shrunk over time, it lowers the tax revenues that feed into the SSA. Fewer workers and lower fertility rates also imply that the revenue shortfalls will face a “lower than expected for longer than expected” revenue shortfall.
Without Congressional intervention, what the public needs to brace for as of today is a 22% reduction in Social Security benefits throughout their retirement. That is a 22% reduction each month for the rest of your life. And it also assumes further cuts are not made to pay the current retirees through the end of their lives.
As incoming payroll tax revenues are not fully covering those mandatory benefit payouts, the two Social Security trust funds are being tapped simultaneously. The main fund is for retirement income, and the smaller fund covers disability benefits. Even if Congress were to “temporarily” use funds from the disability trust fund to boost retirement payouts, the trustee report projects that the two funds are now projected to become insolvent in Q3-2034.
Here is where the real rub comes into play. To help shore up the Social Security and Medicare trust funds will require higher borrowing, a tax hike, a cut in retirement benefits (current and/or future), or a combination of each. Back in 1983, Congress did pass bipartisan legislation to help social security with tax hikes and a reduction in the befits. It seems more than fair to ask if anything can pass bipartisan in the modern era.
There is more than just Social Security to think of here. If the Medicare trust becomes fully depleted, it is currently projected to pay out 89% of total scheduled benefits ahead. The Disability Insurance Trust Fund is currently projected to be able to pay 100% of scheduled benefits through at least 2100.
Here are some stats to consider about the current situation:
- Roughly 67 million to 69 million Americans currently receive a Social Security benefit each month, with more than 57 million counted as retirement beneficiaries.
- The current payout comes to about $1.6 trillion in benefits paid annually.
- The assumed total fertility rate has been cut from 1.90 children per woman to 1.75 children per woman.
- Lower GDP projections over time contribute to higher expenditures as a share of GDP, and lower monthly contributions into the Social Security fund.
- The average Social Security monthly check for retirees was $2,081.16 in April-2026, versus $2,079.49 in the prior month (and versus $1,980.86 in Apri-2025).
- The maximum benefit being paid in 2026 is $5,181 per month, but only for workers who earned at-or-above the taxable maximum for decades and who also delayed their retirement benefits until age 70.
How each person decides to being collecting Social Security in retirement will matter as well. Here are two competing thoughts:
- The decision to begin collecting retirement benefits ahead of the age of 67 years old will generate lower lifetime monthly payments but will also be that many more months of receiving retirement befits.
- Extending to age 70 will increase benefits paid each month, but that will also decrease the number of monthly payments by 36 months to more than 90 months.
One last consideration is that the timing of the SSA reports keeps getting worse. Going back to the 2016 SSA annual report, the trustees were than projecting that the combined trust funds would be depleted in 2034. At the end of 2015, the OASDI program was providing benefit payments to about 60 million people. That was broken down as 43 million retired workers and dependents of retired workers, another 6 million survivors of deceased workers, and 11 million disabled workers and dependents of disabled workers.
