The Social Security Trust Fund, the cornerstone of America’s safety net, is facing its most serious financial crisis in decades. New projections show the program’s trust fund reserves could be depleted by 2034 – one year earlier than previously forecast.
Without congressional action, this would trigger automatic benefit cuts for almost 70 million Americans. While the political gridlock tightens, the window for gradual, effective reform is rapidly closing.
To understand what’s at stake, here’s what you need to know about the crisis facing the Social Security Trust Fund.
What is the Social Security Trust Fund, and why does it matter?
Founded in 1939, the Social Security Trust Fund provides financial support to retirees, individuals with disabilities, survivors, and their dependants. It currently supports more than 69 million Americans with many relying on it as their primary source of income.
The program is financed through payroll taxes. Workers and employers each contribute 6.2% of wages which flows into two trust funds – Old-Age and Survivors Insurance and Disability Insurance.
Additional revenue comes from interest earned on the Trust’s treasury bonds and from the taxes paid on the benefits by received by those on a higher income.
When will Social Security run out of money?
The trust fund recorded a $67 billion deficit in 2024, marking the fourth consecutive year that expenditure has outpaced income. In the same year, the federal government spent US$1.5 trillion to cover mainly retirement and disability benefits.
The 2025 Trustees Report predicts that the Social Security contingency fund from the combined trust funds will be exhausted by 2034. Thereafter, only 81% of the expected benefits would be paid.
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The average retiree would see monthly payments drop from $1,975 in 2024 to about $1,600.
What is causing the shortfall?
The current crisis is being driven by long-term demographic and economic shifts, which have now been compounded by recent legislative changes. The Social Security Fairness Act, enacted in 2025, gave the green light to three steps to address what the Trustees Report cited as being the key reasons for the earlier depletion date of 2034. These are:
- Increased benefits for certain public-sector retirees
- Lower projected birth rates, which means fewer future workers
- Revised labor compensation forecasts, which reduce expected payroll tax revenue
Additionally, several long-term trends have converged to create the funding gap:
- Demographic shifts: The worker-to-social security beneficiary ratio has fallen to 2.8 today from 5.1 in 1960
- Longer life expectancies: Today’s beneficiaries receive payments for over 20 years up from 12–15 years in 1940.
- Wage inequality: Only 83% of earned income is subject to payroll taxes, down from 90% in 1983.
Is Social Security going bankrupt?
No. The system will never be completely insolvent because payroll taxes will continue to fund some of the benefits. However, without action, it will fail to match the demands of the population.
Will Trump’s policies cause Social Security funds to dry up sooner?
The Committee for a Responsible Federal Budget analysis suggests that President Trump’s plans for social security announced during his 2024 presidential campaign could bring forward its depletion date to 2031 and lead to benefit cuts of as much as 33%.
Trump’s plan to eliminate taxes on Social Security benefits would reduce revenue by $950 billion over a decade. Exempting tips and overtime from payroll taxes would cut another $900 billion.
Meanwhile, crackdowns on immigration could remove $24 billion in annual contributions from undocumented workers who pay into the system but receive no benefits. According to the Penn Wharton Budget Model, immigration policy alone could move the insolvency date up by 6–12 months.
Who will be hit hardest by the benefit cuts?
Vulnerable populations would bear the greatest brunt:
- Seniors on fixed incomes, especially the 12% of men and 15% of women who rely on Social Security for over 90% of their income
- 2.4 million disabled beneficiaries are already living in poverty
What reform proposals exist?
Lawmakers remain divided between revenue increases and benefit adjustments, with proposals falling into two main camps: raising revenue or reducing costs.
Revenue-focused proposals are mostly backed by Democrats:
- The Social Security Fair Share Act would reinstate payroll taxes on earnings above $400,000, potentially addressing up to 80% of Social Security’s funding shortfall.
- The Social Security Expansion Act would boost benefits for low-income retirees and fund this with higher taxes on the wealthy.
Cost-cutting proposals are primarily supported by Republicans. Thus, the Republican Study Committee’s 2025 budget proposes to increase the full retirement age to 69 up from 67 currently, phasing in gradual changes starting in 2026.
See also: Trump’s budget cuts put U.S. public health system on shaky ground
The previous funding crises in 1977 and 1983 were resolved through bipartisan compromise. Experts do not rule out that Congress may consider options such as raising the payroll tax, increasing the retirement age, or lifting the income cap which is currently $176,100.
What do Americans want?
Polls show that 79% support lifting the payroll tax cap to ensure higher earners contribute more. Support for benefit cuts or retirement age increases remains low across party lines.
