Will Social Security run out? 3 myths and truths

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Like sands through the hourglass, so are the days of our retirement.

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The so-called Social Security crisis has taken root in the popular imagination, stoking fears that this pillar of retirement income in the U.S. could collapse, taking with it trillions of dollars in promised benefits. But is Social Security really running out of money?

As with Mark Twain’s misreported death, Social Security’s imminent demise is a bit of an exaggeration—one that’s fueled by some common myths and misconceptions. Let’s sort them out.

Reality: Social Security is facing an ongoing shortfall and needs shoring up, but it’s not going bankrupt.

Social Security is complicated for many reasons, not the least of which is the way it’s funded. Most of Social Security’s income comes from a dedicated 12.4% payroll tax that’s evenly split by employees and employers, with the workers’ part deducted from each paycheck. If you’re self-employed, you pay the full amount, less a deduction for paying self-employment tax.

Revenue also comes from investment income and taxes paid by retirees (and others) on their benefits.

That revenue flows into the two main Social Security trust funds:

Since the 1980s, the money coming in had been more than enough to cover Social Security’s expenses. That changed in 2021, when a long-predicted event occurred: The tide turned, and Social Security expenses exceeded income by about $41 billion. To close the gap, the trustees began tapping the pool of reserve funds (which is finite).

Given that the shortfall is projected to continue—i.e., expenses will keep outpacing income if there’s no intervention—the $2.56 trillion surplus (as of 2026), held in Treasury bonds, will be spent by about 2032.

Even then, Social Security will still be able to pay benefits because payroll tax revenue and other income will continue to fund the program. But if the current situation continues, retirement benefits would be reduced by about 22%, with ongoing revenue covering roughly 78% of scheduled benefits.

That brings us to the next myth.

Reality: After the projected depletion of the Old-Age and Survivors Insurance (OASI) trust fund in 2032, if nothing is done, Social Security would be able to pay about 78% of scheduled retirement benefits—but that’s not entirely due to retiring boomers.

At about 71 million strong as of 2020, baby boomers are one of the largest living generations (millennials, who number about 72 million, have surpassed them). And although it’s true that this cohort of retirees has bumped up the amount of benefits being paid out, an even bigger strain—which policymakers didn’t foresee—is the growth of income inequality since the 1990s.

“This has been the primary, unanticipated cause of today’s shortfall,” says Nancy Altman, president of Social Security Works, an advocacy organization, and the coauthor of Social Security Works! Why Social Security Isn’t Going Broke and How Expanding It Will Help Us All. Let’s look at what it means.

Social Security was designed with a maximum taxable wage base. (In 2026, for example, that amount is $184,500.) Historically, the cap ensured that 90% of average wages were captured and subject to tax. The amount the tax provided, along with other income sources, was sufficient to cover benefits.

In the last 30 years, however, higher salaries have resulted in more income earned above the taxable wage base. “Today, instead of capturing 90% of wages, only around 82% is covered,” Altman says. That means less money has been paid into the trust funds, even as the program has faced greater expenditures.

In effect, this imbalance siphoned off potential revenue. “That seemingly small slippage has cost Social Security $1.4 trillion in the last decade,” Altman says.

Reality: Not likely. Policymakers have been debating a range of interventions, most people remain confident that Congress will act in time.

Social Security isn’t popular with everyone, but the program enjoys strong bipartisan support from enough voters and lawmakers that it’s unlikely to fail soon, if ever. And although it may seem that nothing much is happening to avert the Social Security crisis, policymakers are developing and debating a range of potential solutions, including:

Although Americans notoriously resist tax increases, in this case, the majority say they’d rather secure Social Security’s future with higher taxes than by reducing benefits, according to a Gallup poll.

The more pressing question is: When will lawmakers and advocates arrive at an intervention that makes sense and take action?

Despite the rumors that Social Security could be on its last legs, the nearly 90-year-old program is not going anywhere, according to the trustees who oversee it.

That said, Social Security has been running a shortfall since 2021. The gap between income and expenses is being covered by withdrawals from a pool of surplus funds—but that pool is finite, and without intervention, it will be depleted by 2032. At that point, if nothing is done, retirees can expect to get about 78% of their anticipated benefit amounts.

But that’s not likely to happen. Policymakers are working on feasible solutions, one (or a combination) of which would ensure full benefits for everyone, even if the surplus does run out. It’s just a matter of when.