The Social Security Administration was established in 1935, and since then, seniors have become reliant on its benefits to make ends meet during retirement. ‘
As employer pension plans were replaced by 401(k)s in the early 1980s, Social Security payments became the only source of guaranteed income for many older Americans.
The federal program has faced funding issues for decades, but a combination of factors threatens its longevity now more than ever.
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Droves of Baby Boomers are utilizing Social Security resources faster than younger generations can pay into it to replenish the fund, and the new Trump administration tax cuts threaten a significant source of its funding.
However, retirees complain that Social Security payments are already too low to cover the rising cost of living. Several policy initiatives—backed by economists and seniors—could help extend the Social Security Administration’s solvency.
For now, however, its future remains uncertain.
A woman is seen sitting at a kitchen table with a calculator, looking at the Social Security benefits she will receive in retirement. Many seniors find that Social Security payments aren’t enough to cover the rising costs of housing, food, and healthcare,
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Retirees are growing increasingly reliant on Social Security
401(k)s began to replace employer pension plans during the Reagan administration, but the new retirement savings approach may have disadvantaged seniors. Pension plans have a 49% greater cost advantage over 401(k)s due to higher investment returns and longevity risk pooling.
The shift toward 401(k)s and the skyrocketing cost of living caused by inflation has forced many seniors to depend on their Social Security payments.
Most Americans underestimate how reliant they’ll be on Social Security in retirement. The Bipartisan Policy Center found that just 49% of non-retired workers anticipate Social Security as a major source of retirement income, compared with the 82% of retirees who note It is currently a major source of income.
Younger workers are the least likely to consider Social Security a significant source of potential retirement income. In comparison, most older workers are far more likely to accurately estimate the need for Social Security benefits.
Rising housing, food, and healthcare costs have prompted concern among retirees living on a limited fixed income and sparked debate about Social Security funding reform.
Americans support policy reform to increase Social Security funding
The Congressional Budget Office estimates that Social Security is on track to become insolvent by 2034, but experts estimate that the Trump administration’s tax cuts could expedite the process by three years to 2031.
To ensure the longevity of Social Security, benefits would have to be cut by 24%, or revenue would have to increase by 35%.
Related: Your Social Security income may change because of a new rule
The National Academy of Social Insurance found that consumers support policy changes to sustain Social Security and are willing to pay for them. The ideal Social Security reform would combine increasing revenue sources with rising taxes.
Eliminate the payroll tax limit: The Social Security tax cap for 2025 is $176,100. However, keeping that cap while increasing taxes on workers making more than $400,000 per year is the most popular proposal to generate more Social Security revenue.Raise the payroll tax from 6.2% to 7.2%: The total Social Security tax is 12.4%—workers pay 6.2%, and their employers pay 6.2%. However, gradually raising the tax to 7.2% each would provide an additional $500 per year for workers making $50,000 per year. This would be enough to raise revenue while raising taxes negligibly amongst the 164 million Americans paying into the Social Security system.Increase Cost of Living Adjustments (COLA): Overall inflation was 2.9% in December 2024, while shelter inflation reached 4.6%. Experts believe basing COLA on the inflation rates of the biggest costs to seniors—like housing—would better help seniors make ends meet.
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