The U.S. government is considering significant changes to Social Security, including raising the full retirement age, as new projections show key trust funds could be depleted within a decade. A recent report indicates that without legislative action, the program will be unable to pay full benefits to retirees and survivors starting in 2033.
The financial strain also extends to Medicare, with its primary hospital insurance fund facing a similar shortfall timeline. These projections have intensified discussions among policymakers about how to ensure the long-term solvency of America's most critical social safety net programs.
Key Takeaways
- Social Security's main retirement fund is projected to pay full benefits only until 2033.
- After 2033, incoming revenue would cover about 77% of scheduled retirement benefits.
- Medicare's Hospital Insurance fund also faces a shortfall by 2033, after which it could cover 89% of costs.
- Officials are discussing raising the retirement age as one possible solution to ensure long-term funding.
Trustees Report Reveals Financial Pressures
The 2025 annual report from the trustees of Social Security and Medicare provides a detailed but mixed financial forecast for the nation's largest entitlement programs. The report highlights growing financial challenges driven by demographic shifts and economic factors.
The Old-Age and Survivors Insurance (OASI) Trust Fund, which is the primary source of payments for retirees and their families, is projected to have sufficient reserves to cover all scheduled benefits until 2033. However, if no changes are made, the fund’s reserves will be depleted at that point. Ongoing payroll tax revenues would then be sufficient to pay only 77% of promised benefits.
When combined with the Disability Insurance (DI) Trust Fund, the overall projection shifts slightly. The combined funds are expected to be solvent until 2034, one year earlier than last year's projection. After 2034, continuing income would be enough to cover approximately 81% of scheduled payments.
By the Numbers: Projected Shortfalls
- 2033: Year the OASI (Retirement) fund is projected to be depleted.
- 77%: Portion of OASI benefits covered by tax income after 2033.
- 2034: Year the combined Social Security funds (OASDI) are projected to be depleted.
- 81%: Portion of combined benefits covered by tax income after 2034.
Medicare Also Faces Funding Gap
The report also raised concerns about Medicare. The Hospital Insurance (HI) Trust Fund, which finances inpatient hospital care under Medicare Part A, is projected to run short of funds by 2033. After that year, program revenues are expected to cover only 89% of total costs, a figure that would decline over time.
In contrast, the Disability Insurance (DI) fund remains in a strong financial position. Projections show it can meet all of its obligations through at least 2099, reflecting a stable outlook for that specific part of the Social Security program.
Policy Solutions Under Discussion
With a decade-long window to act, policymakers are evaluating various reforms to prevent benefit cuts. One of the primary options being discussed is a gradual increase in the full retirement age for future generations.
Social Security Commissioner Frank Bisignano acknowledged the need for change during a recent interview. He suggested that the rules for younger workers may need to be different from those that applied to previous generations to ensure the program's survival.
"Remember, most people told you and me Social Security wasn’t going to be around. And so the generations that are coming in will probably have a different set of rules than we had."
Bisignano emphasized that finding a solution requires a collaborative effort involving the program's trustees, the White House, and Congress. He stated that the administration is "completely committed to protect and preserve Social Security," but that it will require significant time and effort.
The Role of the Trustees
The Social Security and Medicare Board of Trustees is a six-member body. Four members serve by virtue of their federal office: the Secretary of the Treasury, the Secretary of Labor, the Secretary of Health and Human Services, and the Commissioner of Social Security. Two additional public trustee positions are currently vacant.
Factors Worsening the Financial Outlook
Several key factors contributed to the slightly worse forecast in this year's report compared to previous estimates. These include recent legislative changes, updated demographic assumptions, and revised economic projections.
One significant legislative action was the passage of the Social Security Fairness Act in early 2025. This law repealed the Windfall Elimination Provision and the Government Pension Offset, which had reduced benefits for millions of public sector workers, including teachers, firefighters, and police officers, who also had pensions from jobs not covered by Social Security.
Demographic projections were also adjusted. The trustees now assume that the current lower fertility rates in the U.S. will persist for longer than previously anticipated. A lower birth rate means fewer workers in the future to contribute payroll taxes to support a growing number of retirees.
Finally, economic assumptions were revised downward. The report lowered its long-term estimates for the share of the economy that goes to worker compensation, which directly impacts the amount of revenue collected through payroll taxes.
A History of Congressional Action
The current financial challenge is not the first time Social Security has faced a projected shortfall. Throughout its history, Congress has repeatedly acted to ensure its solvency.
Key legislative interventions include:
- 1939: Lawmakers expanded the program to include benefits for survivors and dependents of workers.
- 1950s & 1970s: Amendments were passed to introduce cost-of-living adjustments (COLAs) and later make them automatic to protect benefits from inflation.
- 1983: Facing a more immediate crisis, Congress passed a major bipartisan reform package. This legislation gradually raised the full retirement age from 65 to 67, increased payroll tax rates, and brought federal employees into the system.
This history of legislative fixes provides a precedent for the type of action that may be required in the coming years. As the 2033 deadline approaches, pressure will mount on Congress and the administration to forge a new consensus to secure the future of both Social Security and Medicare for generations to come.
