Social Security, the core federal social insurance program that provides income for millions of Americans, is facing a funding shortfall in its trust funds. However, this doesn't mean the program is about to go bankrupt or completely lose its ability to pay benefits.
"Social Security will not go bankrupt or collapse," writes Stephen Nuñez, director of economic stratification at the Roosevelt Institute, in a new research paper titled "Is 'Will Social Security Run Out?' the Wrong Question?"
Survey data shows that many Americans are deeply concerned about the future of Social Security, and experts point out that this anxiety could influence their decisions about claiming benefits—one of the most important financial choices they'll make in retirement. Anxiety about the future of Social Security may prompt people to claim benefits early, leading to smaller monthly payments and ultimately weakening their retirement security.
A 2025 survey of 1,812 adults by Nationwide Financial showed that nearly three-quarters (74%) of Americans worry that Social Security will run out during their lifetime. Similarly, another survey conducted that same year by the Cato Institute revealed similar anxieties: the libertarian think tank surveyed 2,000 Americans aged 18 and older and found that 30% of respondents didn't believe they would receive Social Security benefits in retirement, and 70% expected future benefits to be cut.
Nuñez told the media that Americans can absolutely expect Social Security to provide some form of support. He emphasized, "The word 'bankrupt' used in this context doesn't accurately describe what's happening."
Other retirement experts agree, stating that the term "bankrupt" doesn't accurately define Social Security's funding challenges. Alicia Munnell, a senior advisor at the Boston College Center for Retirement Research, wrote in May, "Even if nothing is done, people will still continue to receive most of their benefits."
In fact, this isn't the first time the Social Security system has faced funding difficulties. Government projections show that the trust funds used to pay Social Security benefits will be depleted in less than a decade—these funds are invested in Treasury bonds and represent excess funds not used for current benefit payments. Several bills recently passed by lawmakers have further exacerbated the financial strain on the program, including the Social Security Fairness Act, which increases benefits for some public pension recipients, and the "mega-bill" that lowers taxes for seniors.
According to the latest estimates from the Social Security Administration's chief actuary, the fund specifically designated for retirement benefits could be depleted by the end of 2032. If Congress takes no action by then, beneficiaries could face a benefit reduction of approximately 24%. However, it's important to note that benefits would not cease entirely, as the program would still receive funding from payroll taxes.
Nunez stated that if Congress fails to enact reforms, the way benefits are affected after the trust fund is depleted could vary depending on legal interpretations, including across-the-board benefit cuts, prioritizing payments to the most vulnerable beneficiaries, or phased delays in full benefit payments.
Historically, the retirement trust fund balance reached zero in 1982, at which time the government temporarily authorized borrowing from the disability and Medicare trust funds to alleviate the crisis. In 1983, Congress passed legislation to strengthen Social Security's finances, including raising the full retirement age and levying federal income tax on benefits, aiming to keep the program stable for 75 years. However, due to multiple factors, the anticipated funding gap appeared earlier than expected.
Nunez acknowledged that the 1983 legislators made many correct decisions, such as anticipating the large size of the baby boomer generation and demographic changes like declining birth rates and increased life expectancy. However, two unexpected factors—increased income inequality and the Great Recession—led to the trust fund depletion date being significantly advanced.
Nunez pointed out that these two factors caused the Social Security program to begin drawing on its reserves around 2009, much earlier than the expected dates of 2021 and 2022. If the trust fund had been depleted as originally projected, the date would have been around 2063, not the combined fund depletion date of around 2034 as determined in the Social Security Trustees' 2025 report.
Income inequality directly impacted the amount of funding the program receives from FICA payroll taxes. FICA payroll taxes are only levied on income up to a certain annual limit (which is adjusted annually). In 2026, this limit is $184,500, with a tax rate of 6.2%, shared between employees and employers. In 1983, 90% of workers earned less than this tax base limit, but previous predictions that this proportion would remain stable as average annual income increased have not materialized.
Nunez stated that while actual average income growth met expectations, the distribution of that growth was "unexpectedly uneven." The top 6% of earners consistently exceeded the tax base limit, with their real income increasing by an average of 62% between 1983 and 2000, far exceeding expectations; while the remaining 94% of workers saw their real income increase by only 17% on average. The rate at which the FICA payroll tax limit was raised failed to maintain the 90% tax coverage rate, and by 2000, this proportion had fallen to approximately 82.5% and remained relatively stable, leading to reduced tax revenue for the program's reserves. Analysis by the Bipartisan Policy Center shows that in 2023, only 83% of total wages were subject to Social Security taxes.
The unexpected impact of the Great Recession also damaged Social Security funding: rising unemployment and slower income growth led to reduced payroll tax inflows, while older workers may have chosen early retirement, further increasing the pressure on benefit expenditures.
Currently, the responsibility for addressing the Social Security funding gap falls on legislators, who must decide whether to solve the problem through tax increases, benefit cuts, or a combination of both. Nunez warned, "The longer we wait, the higher the cost will be."
Considering that the retirement benefit fund could be depleted as early as 2032, Nunez believes that the next presidential election "will likely determine the future of the program," and the senators elected this year will still be in office at that time, making their decisions crucial. He emphasized, "Although legislators don't want to deal with Social Security, they will eventually be forced to confront it."
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, wrote in November that while today's legislators vow to protect Social Security, their actions are often characterized by inaction rather than actively pursuing necessary and difficult reforms. She believes that this requires voters to pressure legislators to address the issue. The ultimate reform measures enacted by lawmakers will directly determine the amount Americans pay into Social Security and the level of benefits they receive.
"The most important thing is who will be sitting at the negotiating table making the decisions," Nunez said.
