One of the top trending stories surrounding Social Security is whether the program will run out of money, and when. The long answer is complicated. But the short answer is that Social Security will not be running out of money anytime soon unless something unforeseen happens — although future recipients might have to get by with lower monthly payments than current recipients.

                By                    Vance Cariaga

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Retirement and survivors’ benefits are paid out of the Old-Age and Survivors Insurance (OASI) Trust Fund, which is primarily funded through payroll taxes, according to the Urban-Brookings Tax Policy Center. Payroll taxes also fund the Disability Insurance (DI) Trust Fund, a separate Social Security program that pays disability benefits.

A 2022 report from the Social Security and Medicare Boards of Trustees projected that the combined OASI and DI funds “would be able to pay scheduled benefits on a timely basis until 2035,” after which the combined funds’ reserves will become depleted. At this point, payroll tax income will be sufficient to pay only about 80% of scheduled benefits rather than all of the benefits.

That shortfall will mainly impact the OASI trust fund rather than the DI trust fund. According to the Social Security Administration, the DI fund is no longer projected to be depleted within the 75-year projection period.

In terms of the OASI fund: Social Security for retirement and survivors’ purposes won’t run out of money when the reserve funds are depleted. However, the program will have to figure out a way to get by with less money while still ensuring that Social Security beneficiaries get the full, timely benefits to which they are legally entitled.

One option would be for Congress to restore the financial balance by immediately reducing scheduled benefits by about 20% to account for the projected shortfall, according to a September report from the Congressional Research Service. The required reduction would gradually increase to 26% by 2096.

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Another option would be for Congress to raise the Social Security payroll tax rate from its current 12.4% to 15.6% following the 2035 depletion, and then gradually increase it to 16.7% by 2095.

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Another bill introduced by Rep. Peter DeFazio (D-Ore.) and Sen. Bernie Sanders (I-Vt.) would increase monthly payments to Social Security recipients and also boost the program’s funding by applying the Social Security payroll tax on all income above $250,000. Currently, earnings above $147,000 aren’t subject to the Social Security tax.

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