Jill On Money: Social insecurity 2033

The Social Security (SS) Board of Trustees announced that the SS trust fund is on track to run dry in 2033. When it does, every current and future recipient will be subjected to automatic cuts that will slash benefits by 23 percent unless Congress finally gets its act together.

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This story has been forming for two decades. In its 2014 report, the trustees put it bluntly: “Neither Medicare nor Social Security can sustain projected long-run program costs in full under currently scheduled financing, and legislative changes are necessary to avoid disruptive consequences for beneficiaries and taxpayers.”

Social Security is a pay as you go system, funded by payroll taxes (the FICA line item on your pay stub). Every paycheck, you and your employer each pay 6.2% of your wages (up to the SS wage base, which in 2025 is $176,100) into SS. In the late 1970s and early ’80s, Congress enacted changes, which resulted in more money from taxes than was necessary to fund obligations, creating a surplus. That excess money accumulated in the Social Security trust fund, which acts as a buffer when collections don’t match payments.

Baby Boomers, through no fault of their own, are both the heroes and the villains in the story. During their working years, their raw numbers, along with Congressional action, boosted the program’s finances. But as they retired, claimed their benefits, and lived longer, Boomers have been draining the trust fund’s surplus. Starting in 2021, the trust fund began to shrink in absolute terms.

In 2033, when the trust fund is “depleted,” the system does not halt (or “go broke”), rather payroll taxes keep coming in and benefits keep going out. But the money coming in will only cover about 77% of what promised benefits.

Just prior to the publication of the Trustees’ report, economist Teresa Ghilarducci and her team at the Schwartz Center for Economic Policy Analysis (SCEPA) at The New School wrote extensively about what’s at stake in America’s retirement crisis hits a breaking point.

They noted that Social Security’s legal structure mandates that this scenario “would trigger across-the-board cuts to all retirees, regardless of income or need.” To put this immediate 23% cut into perspective, in May 2025 the average Social Security retirement check was just over $2,000, but if the trust were to be depleted, this person would receive only $1,540, a $460 reduction.

There are several straightforward options any responsible Congress could pursue, either individually or in combination, to fix Social Security:

Raise the payroll tax cap
Right now, Social Security taxes only apply to income up to $176,100 in 2025. If you make more than that, you stop paying Social Security taxes on the excess. Lifting this cap could solve a big chunk of the problem.

Increase payroll taxes slightly
Even a small bump in the rate workers and employers pay could make a significant difference over time.

Adjust the benefit formula
This could mean slightly reducing benefits for higher earners while protecting those who depend most heavily on SS.

Gradually raise the retirement age
This is my least favorite option, because it punishes those who work in physically demanding jobs.

What can you do? Use your voice — pressure from millions of voters tends to focus the minds of feckless legislators.

This is a time to take control of your retirement planning. Make sure that you have created an account at ssa.gov and review your projected benefits – as a precaution, factor in a potential 20% reduction when planning your retirement.

Finally, boosting your retirement savings could act as a ballast against the uncertainty of the Social Security system.

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Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at [email protected]. Check her website at www.jillonmoney.com.