ssa payments: Social Security on verge of bankruptcy and will there be benefit cuts soon? Here’s current situation, how to prepare for cuts and when benefits may fall
Social Security is on the verge of bankruptcy and will there be benefit cuts soon?
Concerns are growing that Social Security is on the verge of bankruptcy. Millions of people depend on monthly benefits, and today’s workers plan to receive Social Security in the future. Although the program will not disappear, benefit cuts may occur.
Social Security current status
Because Social Security generates revenue from payroll taxes, it cannot go bankrupt. However, he faces a financial shortfall. The Old-Age and Survivors Insurance (OASI) Trust Fund will be depleted in 2033. After this date, only 77% of benefits will be paid.
The Disability Insurance (DI) Trust Fund is expected to pay 100% of planned benefits through at least 2099. If both funds were combined, reserves would be depleted in 2034, leaving 81% of benefits payable. These figures may change, but aid reductions are possible unless Congress takes action.
How to prepare for Social Security benefit cuts?
Employees can prepare by increasing contributions to their 401(k) or IRA accounts. Delaying Social Security claims past full retirement age can increase monthly payments. Retirees can reduce their expenses or adjust their retirement portfolio with a financial advisor. Returning to work is another option for maintaining savings. Early planning is important because benefit cuts may occur in the next decade.
Social Security funding announced
Social Security is funded by payroll taxes. Employees and employers each pay 6.2% of wages, making a total of 12.4%. Self-employed individuals pay 12.4% of this entire amount. In 2025, this applies to the first $176,100 of income. Contributions go to a trust fund that pays current retirees. About 85% support the OASI Trust Fund and 15% support the DI Trust Fund.
The importance of Social Security
Social Security is widely supported. In a 2024 AARP survey, 90% of Americans over 50 said it was very important. This is part of the “three-legged stool” of retirement, along with personal savings and 401(k) plans. Nearly half of seniors receive at least 50% of their retirement income from Social Security, and 27% are entirely dependent on it.
Cost of living adjustment
Social Security payments are adjusted for inflation through the Cost of Living Adjustment (COLA). In 2025, the COLA will be 2.5% and benefits will increase by an average of $49 per check. This helps retirees maintain purchasing power despite rising prices.
US Congress options
The U.S. Congress can change Social Security through benefit regulations, payroll tax changes, or raising the retirement age. In 1983, bipartisan legislation increased the full retirement age from 65 to 67 and taxed Social Security benefits to address funding shortfalls.
Supplementary Social Security
Workers can start saving early. Recommended contributions are 10% to 15% of salary. 401(k) plans offer tax-deferred growth and employers can match contributions. Individual Retirement Accounts (IRAs) offer additional options. Charles Schwab and Betterment are examples of reliable IRA providers.
When might benefits drop?
OASI funding will run out in 2033, according to the June 2025 Social Security Trustees Report. In this case, retirees will only receive 77% of all benefits. At the age of 67, all benefits are available. Early collection at age 62 reduces benefits by approximately 30%.
Working while receiving benefits
Retirees can work and collect SSI. Benefits may be reduced for those under age 67 and if earnings exceed the annual limit. Full retirement age provides unlimited earnings while receiving Social Security.
FAQ
When will Social Security benefits be reduced?
Benefits may be reduced when the OASI Trust Fund is exhausted in 2033. Unless Congress acts, retirees could receive about 77% of all benefits.
Can I still work while receiving Social Security?
Yes. You can work while receiving Social Security. Benefits may be deducted if you are under 67 years of age and your earnings exceed the annual limit, but no deductions apply after full retirement age.
