Every June, the trustees overseeing Social Security open the books and subject the program to a comprehensive review, known as a stress test. The 2025 report, published on June 18, confirms what most of us already suspected: the system is still paying benefits on time, but its savings account is running down faster than anyone likes. According to the trustees’ middle-of-the-road forecast, the retirement fund (OASI) hits empty in 2033. Adding in the much smaller Disability Insurance (DI) fund, the combined pot would last only one year longer—until 2034—before reserves dry up. At that point, payroll taxes would still roll in, but they’d cover about 80% of promised checks.
How the numbers stack up
Last year, Social Security took in $1.42 trillion and paid out $1.48 trillion, so it had to tap reserves for roughly $67 billion. And that means the piggy bank keeps shrinking: benefit payments rise by about $90 billion a year while payroll-tax revenue grows more slowly. By 2033, annual benefits are projected to climb to $2.41 trillion, surpassing $2.00 trillion in payroll taxes, leaving a $405 billion gap that must be filled from the dwindling trust fund. In fact, the trust fund, currently sitting at a staggering $2.72 trillion, would fall to only $0.21 trillion (or $214 billion) by the end of 2033.
The squeeze comes from familiar forces: baby boomers are retiring in droves, people are living longer, and birth and immigration rates are below earlier expectations. As a result, the worker-to-beneficiary ratio—2.7 in 2024—slides to 2.3 by 2040.
What happens if Congress does nothing?
When the OASI fund balance hits zero, benefits can’t exceed money coming in. The trustees peg the immediate haircut at about 21 percent for retirement checks and roughly 19 percent for disability checks. A typical retiree collecting $1,976 a month today would see that drop to around $1,600. Poverty rates among older Americans would jump, especially for those in lower socioeconomic situations.
Why it pays to act now
Plugging the hole gets harder each year we wait. Fixing the system for the next 75 years today would require a permanent payroll-tax hike of 3.65 percentage points (split between workers and employers), an across-the-board benefit cut of 22 percent, or some combination of the two. Delaying the start date to 2034 would result in a tax bump of 4.27 points, or benefits would have to decrease by 26 percent. Starting earlier lets changes phase in gradually and gives workers time to adjust their own savings plans.
Tools already on the workbench
Lawmakers have no shortage of options, and below are some of the most commonly considered:
- Raise or remove the wage cap. Only wages up to $176,100 are subject to the 12.4 percent payroll tax. Lifting that ceiling—or re-imposing the tax at very high incomes—would bring new revenue from upper-income workers.
- Nudge the payroll rate. The combined rate has remained unchanged since 1990. A gradual one-percentage-point increase on both employee and employer shares, phased in over 20 years, would close a significant portion of the gap.
- Index retirement age to life expectancy. Full retirement age is already 67 for anyone born in 1960 or later. Linking future increases to gains in longevity would slow benefit growth without touching today’s retirees.
- Tweak the benefit formula for high earners. Shaving replacement rates for upper-income beneficiaries while protecting lower earners keeps the program progressive and saves cash.
- Redirect taxes already collected on benefits. Some of that money now flows to Medicare’s Hospital Insurance trust fund. Steering it all back to Social Security would stretch reserves.
Policy groups across the political spectrum generally support a blended strategy: add revenue, trim growth in the richest benefits, sweeten the minimum benefit for low-wage workers, and implement these changes gradually.
What this means for you
If you’re retired—or within five years of filing—history says Washington won’t cut your current check. For everyone else, assume the program continues to pay, albeit at a slightly lower rate, and use private savings to make up the difference. In plain English, max out that 401(k) and maintain a solid savings plan while Congress hammers out a deal.
The takeaway
The 2025 trustees report isn’t a doomsday notice, but it’s a more straightforward wake-up call. The trust fund cushion now disappears in just eight years, and each year of delay makes the eventual remedy steeper. The math is straightforward, the menu of fixes is well understood, and the longer we wait, the more painful the cure will be. Congress can spread the load, retirees can plan with realistic assumptions, and Social Security can keep the promise it has maintained for 90 years—but only if action starts soon.
Markets / Economy
- Markets were calm considering the Fed meeting and the continued military action between Israel and Iran. The S&P finished the week down -0.2%, the Nasdaq was up 0.2%, and the small-cap Russell 2000 was up 0.4%.
- The Federal Reserve left the federal funds rate unchanged at 4.25%–4.50% for a fourth consecutive meeting, as expected. Despite continued uncertainty, the Fed continues to project two rate cuts later this year.
- Retail sales declined 0.9% MoM in May, following a downwardly revised 0.1% drop in April and missing the forecast of a 0.7% decline. It is the most significant decrease in four months, as consumers pulled back ahead of expected tariffs.
- U.S. housing starts dropped sharply by 9.8% MoM in May to a seasonally adjusted annual rate of 1.256 million units, well below market expectations of 1.36 million. This marked the weakest level since May 2020, in the early aftermath of the COVID-19 pandemic.
Stocks
- U.S. equities were in negative territory. Healthcare and Materials led the decline, while Energy and Financials outperformed. Growth stocks outperformed value stocks, and small-cap stocks outperformed large-cap stocks.
- International equities closed lower for the week. Emerging markets outperformed developed markets.
Bonds
- The 10-year Treasury bond yield decreased five basis points to 4.38% during the week.
- Global bond markets were in positive territory this week.
- High-yield bonds led for the week, followed by corporate bonds and government bonds.
