The Future of Social Security

Social Security paid benefits to 65 million recipients in 2021. Since 2010, the system has been bringing in less revenue than it pays out in benefits and covering the shortfall with its reserves. The 8.7% Social Security cost-of-living increase scheduled to be paid beginning in 2023 will provide vital income to retirees struggling to keep up with inflation, but could also put increased financial strain on the Social Security program. Here’s a look at what could happen to Social Security in the future.

[READ: How Much You Will Get From Social Security.]

The Social Security Trust Funds Will Be Exhausted by 2034

Under current laws Social Security will exhaust its trust funds by 2034, and then benefits will be cut by 23%, according to the 2022 Social Security Trustees report. The 2023 Social Security COLA could cause the Social Security trust funds to use up their resources sooner.

However, the cost of the Social Security COLA will be at least partially offset by higher taxes on workers contributing to the program. The maximum amount of earnings subject to the 6.2% Social Security tax will increase from $147,000 in 2022 to $160,200 in 2023.

Congress could also make adjustments to improve the financial strength of the program. “That has a lot of people nervous or concerned,” says Beau Henderson, founder of RichLife Advisors in Gainesville, Georgia. “But I say, not so fast. What I expect them to do is to continue to make incremental changes to keep it viable.”

A few simple tweaks to the Social Security program could make it sustainable for the foreseeable future. “If there’s a shortfall in 2034 and if Congress did absolutely nothing for the next 12 or 13 years, then benefits will be cut,” says Eric Kingson, a professor at the School of Social Work at Syracuse University and co-author of the book “Social Security Works for Everyone: Protecting and Expanding the Insurance Americans Love and Count On.” “The Congress is not going to do nothing. Nobody would want to be in Congress the day that they’re telling their constituents, oh well, we had to cut your benefits.”

[See: 10 Ways to Increase Your Social Security Payments.]

An Older Full Retirement Age

The biggest Social Security adjustment made by Congress so far has been to increase the retirement age. In 1983 Congress approved legislation that will gradually change the retirement age from 65 to 67. The age for full benefits for most baby boomers is 66. The full retirement age is 67 for those born in 1960 or later.

“I would not be surprised down the road to see that (full retirement age) go to 67 and two months, four months, six months, or extended even longer for full retirement age,” Henderson says. “That’s a change that can keep the system viable. Having to wait to (age) 67 versus 66 isn’t going to have a major impact on how I plan and how I make decisions, but it can keep the system viable for another period of time.”

Kingson says increasing the full retirement age effectively reduces benefits for lower income and disadvantaged workers, most of whom take benefits early starting at age 62. Many people start their benefit early because they can’t stay at a job because of either health issues or unemployment.

If your full retirement age is 66 and you start your Social Security benefit at age 62, your monthly benefit is reduced by 25%. The benefit cut for early claiming is even bigger for those with an older full retirement age. Once the full retirement age is increased to 67, those who claim at age 62 will get a 30% benefit cut. “That’s a huge cut in benefits,” Kingson says. “And it falls very heavily and disproportionately on low wage earners and persons of color, particularly African American and indigenous persons and, to some extent, Latinos.”

[READ: What Is a Social Security Statement? And Why You Should Be Checking It.]

A Higher Cap on Social Security Payroll Contributions

FICA taxes are withheld from paychecks to fund both Social Security and Medicare. The maximum amount of income subject to Social Security tax is $160,200 in 2023, up from $137,700 in 2020. You pay a Social Security tax of 6.2% on wages until your earnings hit the maximum taxable amount, which is adjusted each year. The cap has increased significantly from $76,200 in 2000.

Kingson says if the cap on taxable payroll contributions was eliminated, that would address between half to two-thirds of the projected Social Security shortfall. Another alternative to boost funding to the program would be to increase the payroll tax. Polls show that Americans would be comfortable with modest increases in the payroll tax if it means that benefits would not be cut, Kingson says. “Both Republicans and Democrats, by and large, are much more worried about the benefits not being there than paying a little extra money.”

A combination of a small tax increase or benefit cut could put the program on sound financial footing. “This is a system, and it’s going to have times when it’s overfunded and underfunded. And due to these bumps in the road, you will just need to adjust,” Kingson says. “It’s not a sky is falling event.”

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The Future of Social Security originally appeared on

Update 11/17/22: This story was published at an earlier date and has been updated with new information.

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