It feels like every few months another headline warns that Social Security is running out of money.
In reality, Congress has several options to keep the program funded.
So, let’s look beyond the headlines at what’s actually happening, and what can be done about it.
(Image Source: Gemini AI)
Where the Money Comes From
Before we look at legal levers, let’s clear up how Social Security actually works…
Overall, it’s designed to be self-funding: you and your employer each contribute 6.2% of your wages to Social Security, and benefits are paid from the Social Security Trust Funds. (Social Security has two funds.)1
In the past, there were many more workers than retirees, creating surplus cash that was set aside in the trust funds.
Today, Social Security takes in less than it pays out in benefits, so it’s drawing on its trust fund reserves to make up the difference.
So when people say, “Social Security is becoming insolvent,” what this actually means is that the “extra” savings are getting low, leaving primarily payroll taxes to cover benefits.
Keep in mind, in the 1950s there were roughly 16.5 workers paying into the system for every Social Security beneficiary. Today, there are only about 2.6 workers per beneficiary.2
Also, not everyone pays into the system. Many state employees, teachers and others rely on separate government pensions instead of Social Security.
Fixing the Funding Gap
Congress has several policy levers it can pull before benefits are impacted by a funding shortfall.
These aren’t recommendations, but examples of the options Congress could consider, including:
Raising or Removing the Wage Limit: Right now, Social Security taxes only apply to earnings up to $184,500 (for 2026). Raising or removing this cap would mean Social Security taxes apply to more income, bringing in additional revenue.
Increasing the Payroll Tax: Gradually raising the tax rate by just a fraction of a percentage point across the workforce would create a steady stream of new funding.
Using Other Tax Revenues: Additional funds could come from outside payroll taxes, e.g., corporate taxes or capital gains.
Adjusting the Retirement Age: Pushing the full retirement age (FRA) to 68 or 69 for younger workers gives the program time to adjust, without touching benefits for anyone currently retired.
Rebalancing Benefit Growth: Keep full, promised benefit growth for lower-wage workers while slightly slowing how quickly benefits grow for higher-income brackets.
Modifying Cost-of-Living Adjustments (COLAs): Adjust how annual cost-of-living increases are calculated to reflect how people actually shop when prices increase.
For Example:
Standard inflation calculations using the Consumer Price Index (CPI) assume a retiree keeps buying expensive beef even if prices jump 15%.
An updated formula (Chained CPI) recognizes that people adjust by buying cheaper options, e.g., chicken, which results in a lower inflation rate, enabling slightly smaller annual benefit increases.
Bottom Line
Social Security does face a funding challenge, but “running out of money” doesn’t mean benefits suddenly disappear—despite what some headlines suggest.
Instead, there are many options to bring more money into the system and reduce future costs.
The challenge is deciding which changes to make.
In the meantime, we can plan around what we know and prepare for what may change.
[Resource]: Social Security is just one piece of the retirement income puzzle. For another perspective on making your retirement savings last, read our post: 3 Steps to Help Your Money Outlive —You
If you have any questions, please reach out.
–David Bunker, Financial Advisor & Licensed Fiduciary
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This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.
Sources:
1: SSA.gov, What are the Trust Funds?, https://www.ssa.gov/news/en/press/what-are-the-trust-funds.html
2: SSA.gov, Covered Workers and Beneficiaries, https://www.ssa.gov/oact/TR/2026/lr4b4.html