Deborah K. from Warwick, RI asks: Hi Mitch, A friend of mine shared an article with me about the Social Security program running out of money by 2033. The reason they shared this article with me is that I’m planning to retire the following year! I have retirement savings but I’m also counting on Social Security for income. I suppose I’m looking for reassurance that all will be ok but if there’s a cold hard truth to tell here, please tell it! Thank you for your time.
Mitch’s Response:
Thanks for writing, Deborah. A quick search on my end turned up the recent report you’re referencing, produced by the trustees overseeing Social Security and Medicare (Trustees).
The findings appear pretty dire at first glance—the Trustees project that the Social Security Trust Fund will run out of money in 2034—one year earlier than previously estimated. Once the fund is depleted, incoming payroll taxes would only be enough to cover about 81% of scheduled retirement benefits, which would essentially deem the program insolvent.
Medicare’s hospital insurance trust fund faces a similar fate, now forecast to run out in 2033—three years sooner than last year’s projection—leaving it capable of covering just 89% of its obligations without legislative changes.1
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The acceleration of the projected shortfall stems from several factors. Chief among them is the Social Security Fairness Act, which expanded benefits for certain public-sector workers, including railroad and public pension recipients. Passed with strong bipartisan support and signed into law in early January, this expansion contributed to faster trust fund depletion. In addition, the Trustees revised long-term assumptions about U.S. fertility rates and the share of GDP paid out as wages—both of which impact the flow of payroll tax revenue into the system.
In short, the report’s projections aren’t exactly rosy.
That being said, I do think there are a few reasons not to panic at this moment. For one, the Trustee’s estimates change frequently as economic and demographic inputs evolve. In fact, just four years ago, the projected depletion year was also 2033. Then it shifted to 2034, then 2035, and now it’s back to 2034. This pattern reveals how uncertain long-range forecasting can be, and why dramatic conclusions drawn from these dates can be misleading. The target is constantly moving, not necessarily because the crisis is accelerating, but because the inputs themselves are subject to change.
Looking to the past provides additional clarity. In 1982, the Trustees warned that without immediate action, the Social Security trust fund would be unable to pay benefits on time starting in mid-1983. That dire forecast prompted swift bipartisan legislation, resulting in modest but effective reforms that preserved the program. Social Security didn’t collapse; it adapted. This precedent suggests that political inertia can, under the right circumstances, give way to practical solutions—even for programs often described as untouchable.
None of this guarantees that today’s Congress will act with similar urgency. But in terms of takeaways, I don’t think the focus should be on political outcomes. For you and other folks saving for retirement, I think the takeaway is to redouble your efforts to build up your retirement nest egg. In my view, Social Security will still be there for you when you retire. But planning for the possibility that it may not be can help you more aggressively pursue savings goals – and that’s a good thing, in my view.
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Disclosure