More than 55 million Americans receive Social Security retirement benefits, according to Pew Research. Combined with the disability insurance program, it’s the largest federal program. Needless to say, it affects a large portion of the U.S. population.
Annual Report by Social Security Trustees
Every year since 1941, the Social Security Board of Trustees has presented a financial report of the program to Congress. The board consists of six members, including the secretary of the Treasury as the managing trustee.- most recent past year’s financial operations
- expected financial operations over the next five years
- analysis of the actuarial status of the program
Social Security in Financial Trouble
Social Security is running out of funding. In a message to the public, the SSA’s 2025 report from the Social Security Board of Trustees stated that the Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033.At that time, the fund’s reserves will be depleted. Continuing the program will require a reduction in benefits, and it will only be capable of paying 77 percent of the total scheduled benefits.
That means in 2033, each OASI recipient will experience an automatic cut of 23 percent to benefits under current law. If the OASI borrows from the disability fund, which is not expected to be depleted, it would lead to a 19 percent benefit cut for retirees, according to the Committee for a Responsible Federal Budget.
Fewer Workers Paying Into Social Security Fund
According to the Committee for a Responsible Federal Budget, the population is aging, people are living longer, and birth rates are at an all-time low. That means the seniors receiving benefits are growing while fewer people are paying taxes to support them.According to Marketing Charts, as of June 2025, 102.9 million people were 55 or older. 132.8 million people were aged 25–54. There were 31.4 million people between the ages of 18 and 24.
Social Security, then, may be a program designed for the past. According to the Bipartisan Policy Center, in 1960, there were more than five workers paying Social Security taxes per beneficiary. But that ratio dropped to three to one in 2024, and is projected to decline to less than 2.5 to one by the middle of the century.
The problem is that, with fewer workers and more retirees, even more pressure is placed on the Social Security program.
Funding Social Security
Social Security is funded through payroll taxes. Both the employee and the employer pay these taxes, labeled FICA (Federal Insurance Contributions Act) on a pay stub. Currently, the tax rate is 6.2 percent for employees and 6.2 percent for employers, for a total of 12.4 percent tax. Self-employed individuals must pay the entire 12.4 percent.For 2026, according to the SSA, the maximum amount of earnings on which you must pay the FICA tax is $184,500. That’s an increase from $176,100 in 2025. The maximum earnings are raised each year to keep pace with wage increases. There are no maximum earnings for Medicare.
According to the American Action Forum, by law, the Social Security trust fund does not have borrowing authority. This means that if it becomes insolvent, it cannot borrow from the U.S. Treasury to cover benefits.
Income Taxes on Social Security
Taxes levied on Social Security are another source of revenue.Although based on income, according to the SSA, you must pay taxes on up to 85 percent of your benefits. That means 15 percent of your benefits are tax-free. This 85 percent is based on an individual’s federal return, and your combined income exceeds $25,000. If you and your spouse are filing jointly, your combined income must exceed $32,000.
Combined income represents all Social Security benefits as well as any retirement funds or other income sources.
The Future of Social Security
The Social Security numbers are adding up to a deficit. Clearly, Congress has a lot of work ahead of it when it comes to funding Social Security. As it stands, benefits may be cut in the near future if something isn’t done within the next few years.The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. NTD does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. NTD holds no liability for the accuracy or timeliness of the information provided.
From The Epoch Times