If you rely heavily on your Social Security benefits, chances are you’ve been kept up a night or two wondering whether they’d go far enough. So when President Donald Trump came along promising to make major changes to the program, including ending Social Security benefit taxes for seniors and reducing fraud, you probably felt either hopeful or even more uneasy.
The president did make several key changes to the program this year, but his main agenda item — ending benefit taxes — has yet to come to fruition. And there’s an even bigger Social Security issue that President Trump has remained virtually silent on, to everyone’s detriment.
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Social Security is headed for a crisis
While President Trump hoped to alleviate short-term pain for seniors by eliminating Social Security benefit taxes, doing so would exacerbate a much bigger issue that’s already uncomfortably close to becoming reality. Social Security has been spending more than it’s earning since 2021, and it’s only thanks to the extra money in its trust funds that it’s been able to keep up with scheduled benefits so far.
That can’t last forever. The latest Social Security Trustees Report estimates the trust funds will be depleted in 2034. That’s a year earlier than what last year’s report predicted. That doesn’t mean Social Security would disappear, though.
It would still take in money from Social Security payroll taxes that workers pay as well as Social Security benefit taxes for as long as those remain on the books. But together, that would only be enough to cover about 81% of scheduled benefits in 2035 and beyond.
Social Security reform is the only way to avoid major benefit cuts. This has happened before when the program last faced insolvency in the 1980s. And it’s likely to happen again in the next few years — the sooner, the better.
What Social Security reform could look like
There are three ways to resolve this funding crisis: increase revenue for the program, cut benefits, or do both. Increasing revenue usually means increasing taxes. This could include across-the-board increases or more targeted increases, like raising the ceiling on income subject to the Social Security tax (currently $176,100 in 2025), that would mostly affect the wealthy. We don’t know yet what Congress will choose.
What we do know is that the longer the government waits to address this issue, the more significant the changes will have to be. The Trustees Report says that if Washington acted immediately to make Social Security fully solvent, it would have to do one of the following:
- Increase revenue by an amount equal to a permanent payroll tax increase of 3.65%, bringing it to 16.05% as of January 2025
- Reduce all current and future benefits immediately and permanently by 22.4% as of January 2025 (or by 26.8% if cuts were only applied to those who applied in 2025 and later)
- Some combination of the above
That’s already not a great position to be in, but it gets even worse if we wait. Taking action after the trust funds are depleted would require one of the following steps to keep the program solvent:
- Increasing revenue by an amount equal to a permanent payroll tax increase of 4.27%, bringing it to 16.67% in 2034
- Reduce all scheduled benefits permanently by 25.8% starting in 2034
- Some combination of the above
What happens next?
We don’t have any good options, which is part of the reason why President Trump and Congress aren’t eager to tackle this issue. No one wants to be the one to make a decision that’s guaranteed to hit millions of Americans directly in the pocketbook. But there isn’t a way around it.
There are ways to mitigate the toll it will take on ordinary Americans, like forcing wealthier Americans to pay more into the program. This could reduce the benefit cut or Social Security payroll tax increase, but it wouldn’t be enough to sustain the program on its own.
For now, there isn’t much we can do other than to make our feelings known to our Congressional representatives, who will ultimately decide what the reforms look like. We’re only eight years away from insolvency, so we can’t kick the problem down the road much further. Expect to see this issue start to gain more attention in the next few years. And when Washington does make a decision, it’ll be time for workers and retirees alike to review their retirement plans and make some changes.
