Social Security plays a big role in many people’s retirement income plans. But the program is facing a major financial crisis in the coming years. According to the Social Security Trustees, the program’s Old-Age and Survivors Insurance trust fund is projected to run out of reserves in 2033. The Congressional Budget Office has that happening one year earlier.
At that point, payroll tax revenue will only be sufficient to pay about 77% of scheduled benefits, which could trigger an automatic cut of roughly 23% if Congress does nothing.
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The good news is that lawmakers have several options available to strengthen the program’s finances and prevent Social Security cuts. The challenge is that nearly every proposed fix comes with trade-offs. Here’s a closer look at the leading proposals, and what they could mean for you.
Raising full retirement age
One commonly discussed solution for staving off benefit cuts is increasing Social Security’s full retirement age (FRA). Today, FRA is 67 for anyone born in 1960 or later. Lawmakers could push that age even higher, potentially to 68, 69, or 70 over time.
Supporters argue that this change reflects modern life expectancy trends. Americans are generally living longer than they were when Social Security was created, so many retirees might still collect benefits for decades even if they start taking them later.
Plus, raising FRA keeps people in the workforce longer. Since Social Security’s main revenue stream is payroll taxes, that alone is crucial for preserving solvency.
But critics argue that raising FRA functions as a benefit cut in practice. Workers will either need to claim benefits at a later age or file early (meaning, at today’s FRA) and accept permanently reduced monthly checks. The impact could be especially difficult for workers in physically demanding jobs who may not be able to remain employed into their late 60s.
Raising the payroll tax rate
Another option for preventing benefit cuts is increasing the payroll tax that funds Social Security. Currently, workers and employers each pay 6.2% of wages toward Social Security for a combined 12.4%. Self-employed workers pay the whole 12.4%. Lawmakers could gradually raise that rate to generate additional revenue.
While even relatively small increases could significantly improve Social Security’s long-term outlook, higher payroll taxes would clearly reduce take-home pay. At a time when many households are already struggling with inflation and higher living costs, additional payroll taxes could create financial strain, especially for low- and middle-income earners.
Businesses would also face higher labor costs because employers match employee payroll tax contributions. Workplaces might have to cut employee benefits to cope with higher payroll costs.
Related: Social Security Cuts: How likely are they to happen?
Lifting or eliminating the Social Security wage cap
Social Security taxes only apply to wages up to a certain limit. In 2026, earnings above $184,500 are not taxed for Social Security purposes. Some lawmakers argue that raising or completely eliminating that wage cap is a great way to give Social Security a cash infusion.
The upside of this fix is that it would primarily affect higher earners, making it politically appealing to some lawmakers. Supporters also argue that it would make the system more equitable because higher-income workers would contribute more.
But opponents argue that Social Security was designed as a contributory system tied to earnings, and that a change like this makes it function more like a welfare system. Others warn that sharply increasing taxes on higher earners could discourage spending.
Another debate centers on whether higher taxed earnings should also generate higher future benefits. Right now, Social Security has a maximum monthly benefit that’s tied to the wage cap. If benefits increase in line with higher taxes, the financial gains to the system may not be all that substantial.
Means testing Social Security recipients
With means testing, wealthy retirees would see reduced Social Security, or perhaps no Social Security at all. Supporters of this solution argue that Social Security resources should be focused on retirees who need benefits the most. Reducing payments to wealthy retirees could improve solvency while protecting lower-income beneficiaries from cuts.
But critics argue that means testing fundamentally changes the nature of Social Security. Benefits are earned by paying into the system, and Social Security is not supposed to function like a welfare program. Some also warn that means testing could discourage retirement savings if workers fear accumulating assets will reduce their future benefits.
The bottom line
Lawmakers have multiple options to prevent Social Security cuts, but none are painless. In the past, Congress has managed to step in before Social Security reached a crisis point, and many believe lawmakers will be able to prevent benefit cuts again.
The question is, how will they do it? As Social Security moves closer to its projected trust fund depletion date, the choices may become harder. The takeaway, therefore, is that Social Security isn’t going away, and benefit cuts may not even happen. But if lawmakers do manage to prevent those cuts, the way they go about it may not be pretty.
