Social Security: Here today – here tomorrow
Article published: May 05, 2025
By Katie Klingensmith, Chief Investment Strategist
I recently had the pleasure of hosting a conversation with my colleague and Director of Financial Planning Isabel Barrow and Mike Townsend, Schwab’s Washington-based political analyst. We had the chance to really dig into the future of Social Security – and I want to share some worthwhile takeaways.
Social Security is a personal and emotional topic, especially when you're worried about your retirement security or if you've faced recent financial disruptions. At Edelman Financial Engines, our clients are everyday investors, and we hear real concerns stirred up by headlines about market volatility and Social Security. It's completely natural to feel anxious. That’s why it’s so important to ground ourselves in facts and focus on what we can actually control.
While Social Security does face challenges, it’s far from disappearing. According to the 2024 Social Security Trustees Report, the Social Security trust funds, which are still in surplus, are projected to be depleted by 2034 if no changes are made.1
Even then, you could still anticipate receiving a Social Security benefit. It would be reduced to about 77% of current levels if no policy changes are made – it wouldn’t just shut down or go away.2 This isn’t a new development; Congress has known about the issue for decades and has acted before – most notably in 1983, when bipartisan reforms extended the program’s solvency.
Shortfalls, but options to address them
To address the shortfall, Congress could raise payroll taxes, use general tax revenue, modify or delay early benefit rules or reduce benefits. If Congress were to solely and entirely reduce benefits to address the shortfall, the worst case would be a 23% reduction in benefits, per the Congressional Budget Office.1
Social Security Outlays and Revenues, With Scheduled and Payable Benefits
Source: CBO’s 2024 long-term projections for Social Security
It’s reassuring that there are many well-understood options available to policymakers to address the shortfall. These include gradually raising the full retirement age, modestly increasing the amount of income subject to Social Security taxes, adjusting the payroll tax rate or tweaking how benefits are calculated. Each of these measures, or a combination of them, could help close the funding gap without dramatic disruptions for current or near-retirees.
None of the potential solutions are easy politically – they require tough votes – but Congress has every incentive to act. Social Security is immensely popular across party lines, relied upon by more than 69 million Americans each month,3 and recognized by elected officials as politically untouchable.
Congress has known about this for years. This is not like some big secret that just became surfaced. It’s probably been decades that Congress has been talking about this... I think we’re probably a couple years away from really having a big debate on Social Security... But believe me, Congress is really aware that it’s going to have to do something.
–Mike Townsend, political analyst, Schwab
While solutions exist, political will is limited. Lawmakers know that touching Social Security can be risky, so action often gets delayed. But history offers perspective: The 1983 reforms passed just months before insolvency. We may see similar urgency post-2026 or closer to 2030, when the deadline becomes unavoidable.
It’s also reassuring to understand how much power individuals still have in planning for the future.
While none of us can single-handedly fix Social Security, we can make personal financial choices that prepare us for different scenarios.
–Katie Klingensmith, Chief Investment Strategist
Our financial planners sometimes suggest that, if you want to be extra conservative, you could assume you’ll receive about 75%-80% of your projected benefits when creating your retirement plan. Planning this way might mean aiming for slightly higher savings goals, but it can offer peace of mind, knowing you have a buffer if changes occur. And if no major benefit cuts happen? You'll simply be better positioned financially.
If you want to, as a client, plan for future events – the most negative picture of what could happen – then I would say planning for 75% or 80% of the benefits would be a really conservative way to go.
–Isabel Barrow, Director of Financial Planning
Social Security helps retirees keep up with rising costs by indexing benefits to inflation through annual cost-of-living adjustments. In fact, the average COLA over the past 20 years has been about 2.6% per year,4 helping retirees maintain their purchasing power even as costs rise. While COLAs can vary year-to-year, over time they play an important role in protecting the real value of benefits.
It’s clear that Social Security is a deeply woven part of American life, with most beneficiaries relying on it for most of their income.5 It remains one of the most popular government programs across political lines. That level of reliance and public support creates powerful incentives for policymakers to maintain and strengthen it for future generations.
In short, the future may have its uncertainties – but it’s not out of our hands. With good planning, steady habits and a clear head, we can navigate whatever comes next. That’s something we should all feel a lot better about.
1 Congressional Budget Office. (2024, Aug. 28). CBO’s 2024 long-term projections for Social Security. Retrieved May 1, 2025, from https://www.cbo.gov/system/files/2024-08/60392-Social-Security.pdf
2 Board of Trustees. (2024). The 2024 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. Social Security Administration. Retrieved May 1, 2025, from https://www.ssa.gov/OACT/TR/2024/index.html
3 Social Security Administration. (2024, January). Social Security basic facts. Retrieved May 1, 2025, from https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf
4 Social Security Administration. (n.d.). Cost-of-Living Adjustments. Retrieved May 1, 2025, from https://www.ssa.gov/oact/cola/colaseries.html
5 Center on Budget and Policy Priorities. (2023, December). Policy basics: Top ten facts about Social Security. Retrieved May 1, 2025, from https://www.cbpp.org/research/social-security/top-ten-facts-about-social-security
The information provided is for educational purposes only and does not constitute investment, legal or tax advice; an offer to buy or sell any security or insurance product; or an endorsement of any third party or such third party's views. The information contained herein has been obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness.
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