Social Security Has a Funding Problem. Here's What Lawmakers Could Do About It

"When working Americans retire, they expect Social Security to pay them monthly benefits for the rest of their lives. Those benefits won't replace their paychecks in full, but they're a crucial source of retirement income nonetheless. The problem is that in the coming years, Social Security is anticipating a funding shortfall. And because of that, benefits are facing cuts. That could deal current retirees a catastrophic financial blow. It could also upend the plans of working Americans who plan to retire eventually."

"Social Security gets the bulk of its funding from payroll taxes. In the coming years, though, the U.S. workforce is expected to shrink as baby boomers retire in masses. Social Security's combined trust funds are expected to run dry by 2034. Once that happens, the program may only be able to pay 81% of benefits. The good news is that there are potential solutions that could prevent Social Security cuts. The bad news is that every solution at hand seems to have undesirable consequences."

"Social Security has a wage cap each year that limits the amount of income it taxes. The current wage cap is $176,100, but in 2026, it's increasing to $184,500. Raising the wage cap, or eliminating it completely, could increase funding for Social Security. However, it also raises the question of what to do about the fact that there's a maximum monthly benefit the program will pay that's tied to the wage cap."

Social Security relies primarily on payroll taxes and faces funding pressure as the workforce shrinks with mass baby‑boomer retirements. Combined trust funds are projected to be exhausted by 2034, after which benefits may be payable at approximately 81% of scheduled levels. Potential fixes include raising or eliminating the payroll wage cap, increasing payroll tax rates, or other revenue and benefit adjustments. Each approach carries trade‑offs: lifting the wage cap would raise revenue but challenges formulas tied to capped earnings, while benefit increases tied to higher taxed earnings could offset funding gains. Every option presents political and economic downsides.

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