News reports frequently warn that the Social Security trust fund is nearing depletion. While estimates vary with economic fluctuations, the latest suggests the fund will be exhausted by 2035, just 11 years from now.

Impact on Social Security Benefits

This doesn’t mean Social Security benefits will suddenly cease for eligible seniors. The program is funded through two primary sources: workers’ FICA contributions and the trust fund to cover shortfalls. Currently, about 20% of Social Security payments are drawn from the trust fund. If the fund runs out, the Social Security Administration (SSA) projects benefits will be reduced to 83% of the amounts shown on benefit statements.

Congressional Action on Social Security

Congress is unlikely to ignore this impending issue. The key question is which proposed solutions will be implemented. One suggestion is to raise the full retirement age from 67 to 68 immediately, then incrementally increase it by two months each year. This would cover 44% of the funding gap, effectively reducing future retirees’ benefits by about 13%. Another proposal suggests indexing the retirement age to life expectancy, addressing 20-25% of the gap.

Modifying Inflation Adjustments

Other proposals involve modifying annual inflation adjustments for benefits by switching to a less generous inflation measure. This would cover about 23% of the gap but might face opposition, as many economists believe current benefits already lag behind inflation.

Changing the FICA Payroll Tax Cap

Several ideas focus on changing the FICA payroll tax cap. One proposal would increase the cap from $110,100 to $215,000, filling approximately 35% of the funding gap. Another would subject all earnings to Social Security taxes, addressing 86% of the gap and affecting only 6% of taxpayers. Alternatively, increasing the payroll tax rate from 6.2% to 7.2% while keeping the cap indexed to inflation could reduce the gap by 64%.

Reducing Benefits for High Earners

Reducing benefits for the highest-earning 25% of Americans could cover 7% of the gap. Taxing contributions to retirement plans like 401(k)s might fill 10%, while bringing newly hired state and local government workers into Social Security could address 8%.

Means Testing for Social Security

Finally, several proposals advocate for means testing, where higher-income retirees receive reduced benefits. The most likely means-testing proposal would cover about 11% of the gap.

Future Congressional Actions

Which proposals will be adopted remains uncertain> One that that is certain is that social security will be there in one form or another. Expect Congress to consider a mix of these ideas in the next session, potentially combining two, three, or four to create a viable solution. As with many legislative decisions, the final outcome will likely be shaped by political expediency rather than purely logical considerations.

If you’d to take your turn at solving the social security problem, check out the American Academy of Actuaries Social Security Challenge.


As the 2035 depletion date approaches, the urgency for Social Security reform will increase. Keeping informed about potential changes can help you better prepare for your financial future.

Rich Feight, CFP
Rich Feight, CFP

Hi, I'm Rich Feight I'm a fee-only Certified Financial Planner, successful business owner, and self-made millionaire that knows how to beat the system and become wealthy. I have a lot of clients that have done it too. I'm also pretty good at finding that ever-elusive work/life balance so many of us strive for. Lucky for you I have an abundant mindset and give all my knowledge away on my blog. So if you want to know what it takes to become a millionaire, follow me.