Social Security Is Running Out—Here Are 3 Steps to Prepare

For years, Americans have feared that Social Security may not be there for them when it is time for retirement. In reality, Social Security isn’t likely to “run out” completely, but it is facing funding challenges, and benefits could be reduced if Congressional action isn’t taken.

In this article, we’ll break down the facts, explain more about why Social Security is under financial pressure, and discuss other options you have for your retirement, such as setting up your retirement accounts with either a traditional IRA or Roth IRA.

What Is Social Security and How Is it Funded?

Social Security was established under the Social Security Act, signed by President Franklin D. Roosevelt on August 14, 1935 The program was started to provide for the general welfare of retired Americans and create a federal social safety net that also provides benefits for disabled Americans and survivors of deceased workers.

Social Security is financed through payroll taxes. Employees and employers each pay 6.2% of the tax per pay period, totaling 12.4%, but self-employed individuals are responsible for paying the full 12.4% themselves. For tax year 2025, the 6.2% and 12.4% levies are assessed against only the first $176,100 of taxpayers’ taxable income. That maximum taxable income is up from $168,600 in 2024 and as of January 2025, the average Social Security retirement benefit is $1,976.

Will Social Security Actually Run Out of Money?

According to the Social Security Administration, the Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) trust funds are scheduled to have enough revenue to pay full benefits until 2034, which is one year earlier than projected in 2024. By 2034, only 81% of scheduled benefits will be paid out. The OASI trust fund alone will be depleted by 2033, with only 77% of scheduled benefits to be paid to beneficiaries.

Additionally, the Social Security Office of the Chief Actuary stated that the passage of President Trump’s recent “One Big Beautiful Bill Act” (OBBBA) is projected to further deplete the Social Security trust funds for several reasons. The extension of the 2017 Tax Cut and Jobs Act (TCJA) makes permanent the tax brackets and rates that were slated to expire at the end of this year, resulting in less tax revenue for the Social Security trust funds moving forward. At the same time, this bill increases the standard deduction amounts for those age 65 and older for years 2025 through 2028, further reducing tax liability for seniors. Both of these factors combined mean that the trust fund will receive lower levels of projected revenue from income tax on Social Security benefits.

Unless further Congressional action is taken, benefits will not stop, but they will be reduced for tens of millions of Americans.

Why Is Social Security Facing a Shortfall?

An aging population exiting the workforce means fewer workers per retiree. Combined with the rising cost of living, these factors play a role in the depletion of the Social Security Trust Fund.

One phenomenon happening right now↸—which many observers call “Peak 65” because 2025 is the year when the largest number of baby boomers retires—is one explanation for the depletion of available Social Security funds. The Alliance for Lifetime Income explained that more than 4.1 million Americans are turning 65 each year through 2027, which is more than 11,200 every day. As cited earlier, a reduction in benefits of up to 23% could have devastating economic impacts for current retirees.

Can Congress Fix Social Security?

Congress has options to fix the Social Security system and allow it to potentially continue paying full benefits past 2033. Some of them may include:

• Increasing the minimum age to start collecting benefits.
• Increasing the payroll tax.
• Increasing the maximum taxable income each year, and perhaps more aggressively.
• Adjusting Social Security benefits for beneficiaries.

The 2025 Social Security Trustees Report reveals a 75-year actuarial deficit of 3.82% of taxable payroll. This means payroll contributions would need to increase by that amount on average to maintain the program’s solvency. Without legislative reform, the trust fund will be pushed toward depletion, resulting in reduced benefits. Ultimately, political will is the main barrier, and bipartisan action is necessary to avoid a significant reduction in Social Security benefits.

What Does This Mean For You?

With the Social Security system facing an uncertain future, you should consider defensive action leading up to retirement. Consider saving more, paying down high-interest debt, and living within your means. Another reasonable step: contribute to an employer-sponsored 401(k) plan (especially if you’re eligible for a matching contribution). Third, set up a traditional IRA or Roth IRA, which are great ways to grow your wealth and augment your retirement resources.

Social Security can still provide part of your retirement income. But taking these steps should reduce your reliance on it, making it more of a supplement to your retirement income rather than your sole or major source. Creating a secure plan in advance of retirement is crucial to your financial security during your golden years.

The Bottom Line

Despite what you may hear in the news, Social Security likely isn’t disappearing. However, it does face serious funding challenges that could force reductions in future benefits to new and existing beneficiaries. The program is projected to cover only a portion of the promised benefits as soon as 2033 unless Congress takes action.

By taking charge of your own retirement planning, you can build a resilient financial future regardless of Social Security’s fate.