A Social Security Administration (SSA) office in Washington, DC, March 26, 2025. The Department of Government Efficiency (DOGE) is reportedly aiming to reform and downsize the SSA with office closures, cutbacks on phone services and new rules requiring in-person visits for some prospective beneficiaries to register. (Photo by SAUL LOEB / AFP) (Photo by SAUL LOEB/AFP via Getty Images)
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According to the Social Security Administration, about 75 million Americans are receiving a Social Security benefit. That’s more than 20% of the population or nearly nine out of ten people age 65 and older. This makes Social Security one of the most important programs in the U.S. today, and it’s in trouble. Will Social Security be eliminated? What changes are being considered to save it? How has Social Security changed over the years? As the largest item in the federal budget, will the financial burden become too great to sustain it?
Social Security: Solvency
The Social Security system is in serious financial trouble. While it’s likely that Social Security will continue to pay benefits to Americans, the program may look quite different in the future. Under the current structure, the Social Security Administration estimates that Social Security will pay full benefits until 2033, when it will be forced to reduce benefits by about 23%. In today’s dollars, if you’re retired and receiving $2,000 per month, you’d receive a little over $1,500 per month beginning in 2034. Any reduction in benefits will likely result in less consumer spending and slower economic growth as retirees adjust to a lower income. What actions are being considered to stabilize the program?
Social Security: Possible Changes
Several changes have been suggested to put Social Security on a sound financial path. One suggestion has the greatest effect on higher income individuals. The reasoning goes like this. Social Security was initially created as a safety net to protect Americans against poverty in their old age. In most cases, high income earners have other sources of retirement income, making Social Security an added benefit, but not an essential one. The idea being considered is to cap the maximum Social Security benefit at $100,000 per couple ($50,000 per individual) and address the funding gap. This change could save an estimated $190 billion over the next 10 years.
Other changes under consideration include raising the payroll tax. The payroll tax percentage is 7.65% of wages for employers and employees alike. This hasn’t changed since 1990, 36 years ago. Raising the payroll tax percentage would increase revenue, which is currently well below the $1.6 trillion the program will pay out this year.
Another change being discussed is raising the maximum income subject to the payroll tax. This is called the Social Security wage base maximum. First, there is no income maximum on the Medicare payroll tax withholdings, which is 1.45% for employer and employee. The remaining 6.2% – the payroll tax for Social Security retirement and disability benefits, only applies to income up to $184,500, the wage base maximum for 2026. After that, there is no payroll tax for retirement and disability benefits. Increasing the wage base or ending it altogether would help close the gap between the money collected and benefits paid.
Finally, adopting a flat benefit structure for new beneficiaries (i.e. ending the COLA) is also under consideration. How would this work? Currently, if a married couple consists of a high-income earner and a low-income earner and the high-income earner dies, the surviving spouse will receive an increase in their retirement benefit. Moreover, the amount of the survivor’s benefit would increase each year with inflation. Under the proposal, the surviving spouse’s benefit would remain level, without an inflation adjustment each year.
Social Security: How Its Monthly Benefit Has Changed Over the Years.
Social Security was created August 14, 1935, when President Franklin D Roosevelt signed the Social Security Act. At that time, America was struggling to escape the Great Depression and Social Security was a part of that. If the government could provide a safety net for retirees, it was reasoned, then the financial burden on the federal government would be less than if Social Security was never created. Since that time, millions of Americans have come to depend on the program to provide a necessary income in their golden years.
The first monthly check was received by Ida May Fuller on January 31, 1940, for $22.54, the equivalent of $518 in today’s dollars. The average monthly benefit has risen substantially since then. Today, it is $1,976 per month. The following chart shows how the average monthly benefit has changed since 1970.
Social Security-Average Monthly Retirement Benefit 1970 to 2025
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The number of retired workers as a percentage of the population has risen substantially since it began. For example, in 1970, about 8.1% of the U.S. population were retirees receiving a Social Security benefit. Last year (2025), that percentage had risen to 16.0% (see chart below for details).
Retired Workers Receiving Social Security as % of U.S. Population
MJP
Social Security: Future Generations
When you examine the number of people in future generations, it appears the problem will only get worse. Why? As the following table shows, the youngest Baby Boomers are turning 61 and will become Social Security eligible in one year. Then, the Gen Xers and Millennials will become eligible. These two generations are even larger than the Baby Boomers, and as they become eligible for benefits, it will put an enormous strain on the Social Security program.
U.S. Generations and Social Security
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The Social Security system is headed for significant financial distress unless Congress makes changes to the program. What changes will be made? No one can say for sure. Perhaps the more important question is: Will the federal government address the issue or continue to push it down the road? The sooner we start, the easier the solution. However, at this point, any solution will likely involve a measure of pain. It’s also an unpopular issue for sitting members of Congress as retirees make up a large part of the electorate and any action taken, if perceived as a negative, will cost votes. Therefore, it’s possible that no action will be taken anytime soon.
