The Future of Social Security

Still, the springtime release of an annual report from the trustees who oversee the Social Security trust funds typically causes a flurry of foreboding news coverage, and survey after survey

shows that Americans, particularly younger generations, are doubtful about the program’s future. In a 2024 poll by the Nationwide Retirement Institute, 41 percent of Generation Z

respondents and 36 percent of millennials said they do not expect to get a dime from Social Security, compared to 26 percent of Gen Xers and 14 percent of boomers. Adults born after 1981

“are more likely to assume future benefits will be nonexistent, while families who are five to 10 years from claiming Social Security assume benefits will be reduced or means-tested,” notes

Cody Garrett, a financial planner in Pearland, Texas. DIFFICULT CHOICES Protestors rallied against the privatization of Social Security on Capitol Hill in Washington, D.C., on Tuesday, April

26, 2005. So, what needs to happen to secure Social Security for the long term? Some variables are out of the direct control of the SSA or Congress, such as the economy, wages, life

expectancy and birth rates. But if financial projections hold more or less true, the options are fairly simple, at least on paper: Congress will have to raise taxes, modify benefits or do

some of both. Here are several of the leading approaches discussed by policymakers, starting with ways to bring more money into the system. ADJUST THE TAXABLE EARNINGS CAP. This year,

someone with $1 million in work income would pay the same amount in Social Security taxes as someone with $176,100 in wages. Subjecting all work earnings to the tax would keep the trust

funds solvent until the late 2060s, according to the SSA. Another approach, less drastic, would be simply raising the cap to a higher level or creating a payroll tax “doughnut hole,” with

income between the current cap and a second, higher threshold (say, $400,000) not subject to the payroll tax. INCREASE PAYROLL TAX RATES. As noted, the current rate is 12.4 percent. Some

propose raising that incrementally — to, say, 14.4 percent — to bring additional dollars into the trust funds. But some experts note that such a tax increase would be felt most by those who

earn lower wages or are self-employed. BROADEN THE BASE. Some state and local employees are not covered by Social Security; they have only public pension coverage. Bringing all newly hired

state and local workers into the Social Security system and taxing their wages accordingly would create a large influx of cash, although it would mean more beneficiaries to pay later. But

this isn’t a simple solution either, as it could pose challenges to pension plans operated on behalf of local governments. BROADEN THE DEFINITION OF INCOME. Certain forms of workplace

remuneration, such as the value of employer-sponsored group health insurance or contributions to a flexible spending account, are not subject to SSA payroll taxes. Eliminating these

exclusions would increase Social Security’s revenue. However, the SSA projects that this would only extend the trust funds’ solvency by a few years. A significantly larger target, and so

more politically challenging, would be to levy a Social Security tax on annual investment income instead of only taxing work-related income. The other side of the coin is implementing

changes that reduce benefits to certain Social Security beneficiaries. Here are several approaches that have been floated. INTRODUCE MORE PROGRESSIVITY. Typically referred to as “means

testing,” this approach calls for adjusting the size of your Social Security payments based on your wages, wealth or income. The concept is to protect people below a certain annual income or

wage level so they get full benefits; those who are financially healthier would sacrifice some or all of their Social Security payments. CUT BENEFITS FOR NEW RECIPIENTS. Another approach

would be to pay newly eligible retirees a little less per month than promised. Cutting payments to new retirees by 5 percent, starting in 2025, would extend the life of the trust funds only

to 2036, according to SSA projections. If your monthly payment was to be $2,000, a cut of that size would bring it to $1,900. REDUCE THE COST-OF-LIVING ADJUSTMENT (COLA). The SSA annually

adjusts benefit payments to account for inflation. The yardstick used is the government’s consumer price index for urban wage earners and clerical workers, or CPI-W, which factors in price

increases for everything from apples to gasoline to rent. Proposals have been floated to switch to different inflation measures or to simply reduce the COLA outright. But doing so would be

highly unpopular. Typically, COLAs already come in a bit below the general inflation rate; reducing them would compound the impact of rising prices on beneficiaries over time without doing

much to change the long-term financial health of the program. CHANGE BENEFIT CALCULATIONS. Adjusting the complex formulas used to determine your Social Security payments could result in

modestly lower benefits but help increase the life of the trust funds. Here’s an example: The SSA uses your highest 35 years of salary history to determine your retirement benefit. Using a

higher number of years, such as 38 or 40, would reduce a beneficiary’s average annual earnings and, as a result, the size of his or her monthly benefit. UP THE RETIREMENT AGE. You can start

taking Social Security, with reduced benefits, at age 62. Wait until your full retirement age (currently between 66 and 67, depending on your year of birth), and you qualify for your full

benefit. Gradually increasing one or both thresholds would ease some of the strain on the trust funds. But it would also hurt those retirees who can’t wait longer to get Social Security.

“There are a lot of jobs where people’s bodies just wear out,” says Ribble, the former congressman. Then there are the more radical ideas. Some have suggested scrapping the entire program

and converting it to individual accounts similar to 401(k) plans, in which you contribute some or all of your current payroll taxes to a self-managed retirement account invested in stocks,

bonds and other securities; you would bear the risks and rewards of your choices. President George W. Bush proposed such a plan in 2005, but it was strongly opposed by AARP and widely

rejected by the American public. Experts also note that such a program would mean the trust funds would be depleted sooner, putting current benefits at even greater risk. GETTING IT RIGHT

Though many of its provisions provoked vigorous debate, the 1983 legislation negotiated between House Speaker Tip O’Neill and President Ronald Reagan, which has kept the program solvent over

the past four decades, ultimately won large bipartisan support. “The OASI trust fund actually reached the point where technically, it would have become depleted in 1982,” says former SSA

chief actuary Stephen Goss, referring to the part of Social Security’s coffers that pays out retirement and survivor benefits. (The other part, called the DI fund, pays out disability

benefits.) Fortunately, some technical maneuvers allowed full payments to be made until the Social Security Amendments of 1983 were signed into law. That bill gradually raised full

retirement age for beneficiaries to 67, levied taxes on Social Security payments for some beneficiaries, and increased the payroll-tax rate, all of which would be difficult to reach

consensus on in Congress today. Legislators in Congress still routinely propose bills to alter Social Security, ranging from small adjustments to substantive overhauls. Dozens of members

have introduced such bills in the last few years; to date, none has moved to a full vote. STANDING ON ONE LEG? Americans rely on it. It’s long been cited that Social Security was meant to

provide just 40 percent of your retirement income. But according to SSA data, among Americans ages 65 and over, 12 percent of men and 15 percent of women rely on Social Security for 90

percent or more of their income. Even a modest reduction in benefits would hit them hard. And 39 percent of men and 44 percent of women in that age group get 50 percent or more of their

income from the program. With nearly 69 million people receiving benefits, that means tens of millions of Americans depend heavily on the program. And already, their payments aren’t high. 

The average retirement benefit from Social Security in February 2025 was about $1,981 a month, or $23,772 a year. The median rent for an apartment in the U.S. that month was $1,607,

according to Rent.com. “When I did my research on it, probably the hardest-hit recipient of Social Security was a widow who has outlived her family savings and is now living in old age,

strictly on Social Security,” Ribble says. “She’s trying to live off a $700- or $800-a-month payment.”
 Even though those who rely on Social Security alone are struggling, and the trust

funds face depletion, lawmakers haven’t acted — yet. Still, if history is any guide, there’s reason to hope that Congress will find a solution. Says Goss, who retired from Social Security in

January 2025 after more than 50 years with the program, “We’ve never reached the point where we depleted the reserves and had to reduce benefits.” AARP AND SOCIAL SECURITY For more than 65

years, AARP has fought to protect Americans’ hard-earned Social Security benefits, answer your questions about the program and make sure it continues to be financially strong for future

generations. Here’s what those efforts look like today. ADVOCACY IN WASHINGTON AND BEYOND In 2025, AARP continues to call on the SSA to maintain and improve the customer service Americans

have paid for and on Congress to shore up Social Security’s long-term finances and keep the promises made to current and future beneficiaries. We have fought hard against arbitrary cuts to

the cost-of-living adjustment and against congressional proposals to create a fiscal commission that could target Social Security as a way to deal with budget deficits. We will continue

highlighting customer service challenges and solutions at the SSA and advocate for Congress to approve adequate funding for the agency to deliver benefits and services properly and promptly

to its growing number of customers. Nine U.S. states still tax Social Security benefits. AARP will continue working at the state level to reduce or eliminate this tax burden for more

retirees and their families. HELPING TO ANSWER YOUR QUESTIONS AARP’s Navigating Social Security knowledge base can help you find answers to both basic and complicated questions about Social

Security. And the AARP Social Security Calculator can provide estimates of future benefit payments and information on how to maximize them. ONLINE SEMINARS AARP offers free webinars to help

Americans 50 and older make informed decisions about Social Security. Consumers also can watch past webinars related to financial planning, Medicare and fraud and get help from retirement

experts. A VALUABLE RESOURCE AARP’s regularly updated edition of _Social Security for Dummies_ is the one guide you need to navigate the complex world of Social Security benefits. Find out

more at aarp.org/dummies.