Social Security's piggy bank is shrinking

The Social Security trust fund that helps pay retirement and survivor benefits to ~69 million Americans is expected to run dry in late 2032, one year earlier than previously projected. After that point, the program would only be able to pay 78% of scheduled benefits.

That’s according to an annual report published yesterday by the Social Security Board of Trustees, which oversees the financial health of the program.

What's the problem?... In short: more Americans are drawing Social Security benefits than ever before, but there aren't enough new workers paying into the program to fully support them. That's because Social Security largely relies on payroll taxes from current workers to fund benefits for today's retirees.

• In 1960, the average number of children born to a woman in the US was 3.6; by 2021, that number had declined to 1.75.
• An American who reached the age of 65 in 1960 was expected to live to 80; today, that person is expected to live to 85. (Over the same period, the minimum US retirement age increased by two years to 67.)

The Trustees say this year's outlook worsened partly because they lowered their projections for future immigration, while last year's One Big Beautiful Bill Act is expected to reduce tax revenue flowing into Social Security's trust funds.

It’s all starting to add up

Social Security collected ~$1.45 trillion in revenue last year but paid out ~$1.61 trillion in benefits and other costs, causing its reserves to shrink by ~$160 billion. As a result, the trust fund’s combined reserves fell from $2.72 trillion at the start of the year to $2.56 trillion by December 2025.

And much like Benjamin Button in his tweens, the shrinking isn’t projected to stop there. Trustees project the retirement fund will continue drawing down its reserves over the next several years until it's exhausted in late 2032, triggering an automatic 22% reduction in scheduled benefits unless Congress acts.

Is there anything we can do about it?... Congress has several options to improve Social Security's finances, including:

1. Raising the Social Security payroll tax paid by workers and employers.
2. Increasing the amount of income subject to Social Security taxes.
3. Raising the retirement age or reducing future benefit growth.

📊 Flash poll: Which of the following potential solutions to Social Security would you support?

• Tax hike
• Benefit cut
• Raise the min retirement age
• Some combination of the above
• Do nothing