The Future of Social Security

From time to time, the solvency of Social Security makes its way back into the headlines, often framed in stark terms that suggest imminent collapse:

“72% of Americans worry Social Security will run out in their lifetimes. Here’s what experts say.” – CNBC

“The Social Security Crisis Is Coming.” – Wall Street Journal

This is not uncharted territory. The last major Social Security legislation was passed in 1983. At that time, the system was months—not years—away from being unable to pay full benefits.

Today’s situation, while serious, is meaningfully different.

According to the 2025 annual report (PDF) from the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, the Social Security trust fund reserves are projected to be depleted by 2033. That sounds alarming, but trust fund depletion does not mean Social Security payments stop.

Even in the 2033 depletion scenario, ongoing payroll tax revenue would still be sufficient to pay approximately 77% of scheduled benefits, gradually declining to roughly 72% by 2099. In other words, Social Security would continue paying a substantial portion of benefits even without legislative changes.

How Social Security Works

One of the most common misconceptions is that Social Security operates like a traditional pension plan, drawing benefits from a large pool of invested assets. In practice, the system is largely pay-as-you-go. Current workers fund current retirees through payroll taxes:

When payroll tax revenues exceeded benefit payments in prior decades, the excess was credited to the Social Security Trust Fund in the form of special-issue Treasury securities. Those reserves are now being tapped to help make benefit payments which exceed the ongoing payroll taxes being collected.

Why the Gap Exists

The challenge facing Social Security is not primarily one of mismanagement, but of demographics:

• Americans are living longer.
• Birth rates are lower.
• Fewer workers are supporting more retirees.

These trends have been visible for decades and reflected in trustee reports year after year. Social Security’s funding gap is structural, not sudden, which is precisely why policymakers still have time to address it.

Likely Policy Responses

For retirees already receiving benefits, history suggests changes are unlikely to be abrupt or retroactive. For those still working, the greater risk is not that Social Security will disappear, but that future benefits may be somewhat lower than the amounts currently scheduled under today’s rules.

Historically, Social Security reforms have tended to be gradual and bipartisan, even if the process is politically messy. Potential solutions generally fall into a familiar mix:

• Increasing the payroll tax rate;
• Increasing the taxable wage base (the amount of annual earnings subject to the payroll tax);
• Gradually reducing benefits, including changes to benefit formulas or the Full Retirement Age.

The Social Security Trustee board estimates that maintaining full solvency through 2099 would require an immediate and permanent payroll tax increase of approximately 3.65 percentage points, bringing the total rate to 16.05% beginning in 2025. If action were delayed until projected trust fund depletion in 2033, the required increase would be larger, approximately 4.27 percentage points, bringing the total rate to 16.67%.

None of these options are painless, but none require radical restructuring either. As with most policy-related dilemmas, the most likely outcome is a compromise that spreads the impact across multiple levers rather than relying on a single dramatic change.

For those already receiving benefits, history offers reassurance. When Social Security was last reformed in 1983—at a time of far greater urgency—benefits for current retirees were left intact, with changes phased in gradually for younger workers. While future adjustments are possible, they are far more likely to be forward-looking than abrupt or retroactive.

From Our Perspective: Planning First, Policy Second

Decisions around Social Security are best made in the context of your personal financial plan, not in response to headlines or political uncertainty. The most important inputs are ones we already model and revisit regularly:

Family history and longevity

Life expectancy varies widely from household to household. For families with a history of longevity, delaying benefits can meaningfully improve the outlook for your financial plan. For others, claiming benefits earlier may be more appropriate.

Higher-earning spouse considerations

For married couples, the claiming decision of the higher-earning spouse often matters most. That benefit effectively becomes the survivor benefit, with implications that can extend well beyond the first retirement date.

Liquidity and portfolio flexibility

Adequate liquidity allows Social Security decisions to be made strategically rather than out of necessity. When portfolios can support spending early in retirement, it creates the option to delay benefits and hedge longevity risk.

Tax planning and income coordination

Social Security does not exist in a vacuum. Claiming decisions interact with portfolio withdrawals, Roth conversions, required minimum distributions (RMDs), and overall tax efficiency. These levers within our control are often more impactful than modest changes in Social Security benefit formulas.

When viewed through this lens, Social Security becomes less about guessing future legislation and more about integrating all sources of cash flow into a broader, flexible plan. Just as with periods of market volatility, the goal is not to react to every headline, but to ensure your plan remains resilient across a range of reasonable outcomes.

It is also worth acknowledging that for some individuals, the decision is not purely analytical. Many people simply prefer to take Social Security earlier—a “bird in the hand” approach that values certainty and immediacy over the possibility of higher benefits later. When this preference aligns with a household’s broader financial plan, claiming benefits early can be entirely reasonable. As with all planning decisions, the goal is not to optimize a single variable, but to make choices that fit comfortably with your financial picture and peace of mind.

In the end, Social Security is unlikely to vanish, and it is equally unlikely to look exactly the same decades from now. Our role is not to predict the precise policy outcome, but to help ensure that your financial plan does not depend on any single assumption. By stress-testing plans, coordinating income sources, and maintaining flexibility, we can account for a wide range of Social Security outcomes without letting uncertainty drive decisions. As with many aspects of long-term planning, discipline and perspective tend to matter far more than headlines

This information is believed to be accurate at the time of publication but should not be used as specific investment or tax advice as opinions and legislation are subject to change. You should always consult your tax professional or other advisors before acting on the ideas presented here.