Social Security Trust Funds to Run Dry 1 Year Earlier Than Projected; Benefits to Drop by 19%

Last week, the Social Security Board of Trustees highlighted in its annual report that the Social Security Trust Funds, comprising Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI), will have sufficient revenue to pay 100% of all scheduled benefits and cover administrative costs until 2034, which is one year earlier than estimated last year.

Beyond 2034, the combined trust funds will have income to support only 81% of the payable scheduled benefits if Congress does not intervene, according to the Social Security Administration (SSA) press release.

A 19% benefits reduction could derail household budgets for millions of retirees. For instance, the average Social Security cheque size in January was £1,452 ($1,976), and a 19% reduction would lower income by £276 ($376) monthly to £1,175 ($1,600).

Furthermore, the OASI fund reserves are expected to be depleted in 2033, when it can support only 77% of benefits payable at that time, while the DI trust fund is not expected to run dry during the 75-year projection period.

The primary reason Social Security trust funds are facing depletion is the ageing population compared with prior decades. The ratio of workers to retirees has significantly changed, as SSA data revealed the ratio of covered workers paying taxes to the number of beneficiaries was 8.6 in 1955, but has markedly declined to 2.8 in 2013.

'Social Security and Medicare won't even be able to pay full benefits to current retirees – they will be insolvent when today's 59-year-olds reach the full retirement age and today's youngest retirees turn 70,' Maya MacGuineas, president of the Committee for a Responsible Federal Budget, stated.

Social Security Programme Costs Continue to Exceed Annual Income

In 2024, the combined trust fund reserves dropped by £49.24 billion ($67 billion) to £1.99 trillion ($2.72 trillion) as total programme costs exceeded annual income. This deficit has continued to widen every year since 2021. The report said the Social Security overheads have exceeded its non-interest income since 2010.

Total income for the Social Security trust funds was £1.04 trillion ($1.42 trillion) in 2024, which includes £948 billion ($1.29 trillion) from payroll tax contributions, £40.42 billion ($55 billion) from benefits taxation, and £50.71 billion ($69 billion) from interest income. Almost 184 million people had earnings covered by Social Security and paid payroll taxes in 2024.

Meanwhile, total expenditures from the combined OASI and DI funds were £1.08 trillion ($1.48 trillion) last year. Most of it was benefits paid to over 68 million recipients throughout 2024. At the same time, the projected actuarial deficit over the 75-year period is 3.82% of taxable payroll, up from 3.5% projected in last year's report.

'To ensure we serve the public and deliver high-quality service to the 185 million people who work and pay payroll taxes for Social Security and the 70 million beneficiaries who will receive benefits during 2025, the financial status of the trust funds remains a top priority for the Trump Administration,' Frank Bisignano, Commissioner of the Social Security Administration noted in the release.

'Congress, along with the Social Security Administration and others committed to eliminating waste, fraud, and abuse, must work together to protect and strengthen the trust funds for the millions of Americans who rely on it – now and in the future – for a secure retirement or in the event of a disability,' Bisignano added.

The concerning projections of the Social Security trust funds getting depleted in nine years come as people worry about benefits continuity amid federal overhaul under the Trump Administration.

The ongoing changes to Social Security payment systems, eligibility rules, and the nationwide workforce amid rumours of benefits disruptions are leading many retirees to claim Social Security cheques earlier than planned and settle for a lower monthly income for life.