‘Will Social Security run out?’ is the wrong question, economist says

Social Security, the federal social insurance program that millions of Americans rely on for income, faces a shortfall in funding it counts on from its trust funds.

But that doesn’t mean the program is going bankrupt or will be entirely unable to pay benefits.

“There is no bankruptcy or collapse in the cards,” Stephen Nuñez, director of stratification economics at the Roosevelt Institute, writes in new research titled, “‘Will Social Security run out?’ is the wrong question.”

Surveys show many Americans are worried about Social Security’s future, and experts say this may inform their decisions about claiming benefits, one of the most important financial decisions in retirement. Concerns about the program’s future may prompt people to claim benefits earlier — which reduces their monthly checks and, in turn, may weaken their retirement security.

Almost three-quarters of Americans — 74% — said they worry Social Security will run out in their lifetimes, according to a 2025 Nationwide Financial survey of 1,812 adults.

Another 2025 survey from the Cato Institute found 30% of respondents don’t believe Social Security will be there for them when they retire, while 70% expect benefits to face future cuts. The libertarian think tank polled 2,000 Americans ages 18 and over.

Americans can assume that Social Security will be there for them in some form, Nuñez told CNBC.com.

“The word ‘bankruptcy’ used with the program doesn’t really accurately describe what’s happening,” he said.

Other retirement experts have similarly argued that the term “bankrupt” does not accurately describe Social Security’s funding predicament.

“Even if nothing is done, people will continue to receive the bulk of their benefits,” Alicia Munnell, senior advisor at the Center for Retirement Research at Boston College, wrote in May.

In less than 10 years, government projections show, the Social Security trust funds used to help pay benefits will be depleted. The trust funds, which are invested in Treasury securities, are excess money reserves that were not used to pay benefits.

Recent legislation enacted by lawmakers has made the program’s financial issues more imminent. That includes the Social Security Fairness Act, which increased benefits for certain public pensioners, and the “big beautiful” tax package that reduces tax rates seniors pay.

In particular, the fund dedicated to retirement benefits may run out by late 2032, according to the latest estimates from the Social Security Administration’s chief actuary. If Congress does not act, beneficiaries may face an estimated 24% benefit cut.

Notably, benefits would still be payable, as the program would have money coming in from payroll taxes.

If the program reaches that depletion date without congressional action to reform the program, there are several ways benefits may be affected, depending on the interpretation of the law, Nuñez said. Among the possibilities include an across-the-board benefit cut, prioritization of payments to the most vulnerable beneficiaries or staggering full benefit payments on a delayed schedule.

Social Security has been in this situation before. In 1982, the balance of the retirement trust fund fell to zero, prompting the government to temporarily authorize loans from the disability and Medicare trust funds.

In 1983, Congress passed legislation to shore up Social Security’s finances that included changes like raising the full retirement age and applying federal income taxes on benefits.

That package of reforms was slated to shore up the program for 75 years.

Yet the projected shortfall is coming much sooner.

There was a lot that lawmakers at the time got right, Nuñez said, such as anticipating the large size of the baby boomer population that would eventually claim benefits, as well as demographic changes, including a declining fertility rate and increased longevity.

Two surprises — earnings inequality and the Great Recession — have prompted the projected depletion dates to move up sooner.

Those two factors prompted the program to start drawing down its reserves around 2009, much sooner than had been projected in 2021 and 2022, according to Nuñez.

Had the trust funds matured as projected, the depletion date would have been around 2063, rather than roughly 2034, the date Social Security’s trustees identified for the combined funds in their 2025 report.

Income inequality has affected how much the program takes in from the FICA payroll tax, which is applied to earnings up to a certain cap that is adjusted each year. In 2026, that limit is $184,500. Earnings up to that amount are subject to a 6.2% payroll tax paid by workers and another 6.2% paid by their employers.

In 1983, 90% of earnings were below the Social Security FICA payroll tax cap.

Yet projections that the percentage would stay about the same with future average annual earnings growth proved to be inaccurate.

Average real earnings grew as expected. Yet those gains were “unexpectedly unequal,” Nuñez said.

The top 6% of earners continued to have wages above the payroll tax cap. Yet their real earnings grew by an average of 62% from 1983 through 2000, exceeding expectations. Meanwhile, the remaining 94% of workers only saw a 17% increase in average real earnings.

The FICA payroll tax cap did not increase quickly enough to maintain the 90% tax coverage. As of 2000, it had dropped to about 82.5%, and mostly stabilized there, according to Nuñez — which meant less tax revenue for the program’s reserves. In 2023, 83% of total payroll was subject to Social Security taxes, a Bipartisan Policy Center analysis shows.

The unexpected economic shock of the Great Recession also hurt Social Security’s funding, as higher unemployment and slower earnings growth meant less payroll tax revenue coming into the program. Older workers may have opted for retirement, increasing the benefits the program paid out.

It is now up to lawmakers to decide how Social Security’s shortfalls will be addressed, whether through tax increases, benefit cuts or a combination of both.

“The longer we wait to do something, the higher the cost is going to be,” Nuñez said.

The soonest projected depletion date — 2032 — means the next presidential election “could very well determine the future of the program,” Nuñez said.

Senate lawmakers who are elected this year will also be in office at that time.

“Legislators are going to be forced to deal with Social Security, even though they have not wanted to,” Nuñez said.

While today’s lawmakers have vowed to protect Social Security, their approach has largely meant doing nothing rather than tackling the tough reforms the program needs, Maya MacGuineas, president of the Committee for a Responsible Federal Budget, wrote in November.

That leaves it up to voters to press lawmakers to address the program, she said.

The changes they make will determine how much Americans pay into Social Security and the amount of benefits they receive.

“What’s going to matter the most is who’s at the table making those decisions when that time comes around,” Nuñez said.