The Trust Fund

Published On: September 17, 2025

Written by: Ben Atwater and Matt Malick

Social Security is the bedrock of financial stability for millions of Americans, providing a crucial source of income for retirees and people with disabilities. But a looming deadline is casting doubt over the program’s future, causing concern about the dependability of Social Security benefits.

The worry stems from the Social Security trust fund, which the Social Security Administration forecasts will run out of money in the coming decade. While this does not mean the program will disappear, it does risk a potential reduction in benefits for millions of people.

Payroll taxes from current workers primarily fund Social Security. For decades, the system brought in more money than it paid out, and the Treasury Department invested this surplus in interest-bearing U.S. Treasury bonds, forming the Social Security trust fund.

However, a major demographic shift is reversing this trend. The retirement of the Baby Boomer generation, combined with declining birth rates, means that there are fewer workers paying into the system for every person collecting benefits.

For example, in 1960 there were 5.1 workers to support each retiree on Social Security; today that number is 2.8 workers to support each retiree.

The Social Security Administration’s Board of Trustees projects that the combined Old-Age and Survivors Insurance and Disability Insurance (OASDI) trust funds will deplete by 2034. The Old-Age and Survivors Insurance (OASI) trust fund, the component of OASDI that pays retirement benefits, might run out even sooner, in 2033.

A common misconception is that when the trust fund runs out, Social Security benefits will cease. However, even after the trust fund depletes, the program will still receive revenue from ongoing payroll taxes. The problem is that this incoming revenue will only be enough to pay a portion of the scheduled benefits.

Recent estimates indicate that without congressional action, benefits would decline to about 81% of what Social Security currently promises. For millions of Americans who depend on these payments to cover basic expenses like food and housing, a reduction of this magnitude would be devastating. Even mass affluent Americans could see their retirement plans altered.

While the trust fund’s projected depletion date is a serious issue, it is not an unfixable problem. Policymakers have a range of options to shore up the program’s finances, including increasing payroll taxes, removing the Social Security wage base, raising the retirement age, modifying the cost-of-living-adjustment (COLA) formula, shifting other government revenue to Social Security or increasing the annual budget deficit to cover Social Security’s promised payments.

In our view, a major reduction in benefits within the next decade for those receiving benefits is highly unlikely, even in our fractured political environment. After all, seniors vote like no other age cohort among the U.S. electorate. Cuts in Social Security benefits would be political suicide for individual politicians or even whole political parties. We think Social Security is and will remain the third rail of American politics for the Baby Boomer generation.

For our clients who are eligible for Social Security but have not yet claimed, we are not currently recommending that they claim their benefits early. Under current rules, by claiming early you lock in a lower monthly benefit. This is particularly true if you are in good health, have good genes and expect to live past 80. Waiting to claim Social Security remains the prudent strategy for healthy people who can afford to delay.

Younger clients, those of us in Generation X and after, should plan more cautiously as in the longer term it is likely that Social Security will need to undertake some meaningful reforms. Younger clients should prioritize retirement savings as a hedge against a future reduction in benefits.

The anxiety surrounding Social Security is a powerful reminder of the program’s importance and the urgent need for meaningful reform.