What the 2025 Social Security Report Means for Your Future
The Trustees of the Social Security and Medicare Trust Funds issued their annual report in June 2025. The report found that the deterioration in the Trust Funds’ finances was worsening. The Funds’ Trustees expect the Old-Age and Survivors Insurance (OASI) Trust Fund, which supports Social Security benefits, to run out of money in 2033, nine months earlier than predicted last year.
Despite the depletion of OASI, the Trustees expect contributions to Social Security to be sufficient to pay 77% of scheduled benefits.
Why the Outlook Has Worsened
Three factors are fueling the deterioration in Social Security’s Finances.
- Impact of the Social Security Fairness Act
The Social Security Fairness Act, which went into effect in January 2025, increases benefits for 2.8 million government and public sector workers. Social Security did not receive additional funding to support this expansion in benefits. - More Retirees
The fundamental problem facing Social Security and Medicare is the aging of the American population. The largest source of funding for Social Security and Medicare benefits is the taxes paid by today’s workers. With the retirement of the Baby Boom generation, more retirees are receiving benefits for a longer period of time. - Fewer Workers
With lower birth rates and longer life spans, there are fewer workers paying into the programs. For example, in 1960, there were 5.1 workers for each Social Security beneficiary; in 2024, there were 2.7. Government actuaries now predict that birthrates will remain lower for longer.
How the Trust Funds Work
Payroll taxes from today’s workers go into the Trust Funds. In the past, when payroll taxes and other income exceeded benefit payments, the Social Security and Medicare Trust Funds built up reserves. Over the last several years, these reserves were tapped to supplement the shortfall in payroll taxes and other income to meet Social Security’s and Medicare’s current financial obligations.
Social Security consists of two programs, each with its own Trust Fund. Retired workers and their families and survivors receive monthly benefits under the OASI program; disabled workers and their families receive monthly benefits under the Disability Insurance (DI) program.
The OASI Fund’s reserves are projected to be depleted in 2033. Once depleted, Trustees estimate scheduled benefits will be reduced by 23%. Reserves in the DI Trust Fund, which is on stronger footing, are projected to be sufficient for at least the next 75 years.
Medicare also has two Trust Funds. The Hospital Insurance (HI) Trust Fund pays for inpatient and hospital care under Medicare Part A. The Supplementary Medical Insurance (SMI) Trust Fund comprises two accounts: one for Medicare Part B physician and outpatient costs and the other for Medicare Part D prescription drug coverage.
The HI Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, three years earlier than reported last year. At that point, the HI Trust Fund’s reserves will become depleted and continuing program income will be sufficient to pay 89% of total scheduled benefits. Please note that projections of Medicare costs, like projections of health care costs generally, are highly uncertain.
The SMI Trust Fund for Medicare Parts B and D is adequately financed into the indefinite future because, unlike the other trust funds, its main financing sources—enrolled beneficiary premiums and the associated federal contributions from the Treasury—are automatically adjusted each year to cover costs for the upcoming year. Although the financing is assured, the rapidly rising SMI costs have placed steadily increasing demands on beneficiaries and general taxpayers.
Possible Fixes
If Congress does not take action, Social Security beneficiaries will face a benefit cut after the Trust Funds are depleted. Any permanent fix to Social Security is likely to require a combination of the following changes.
- Raise the Social Security payroll tax rate, currently 12.4% (for employees paying FICA, half of this is paid by the employee and half by the employer; those paying SECA, such as clergy and self-employed individuals, are responsible for paying the full amount). The Trustees estimate that an immediate and permanent payroll tax increase to 16.05% would be necessary to address the long-range revenue shortfall.
- Raise the ceiling on wages subject to Social Security payroll taxes ($176,100 in 2025).
- Raise the full retirement age (currently 67 for anyone born in 1960 or later).
- Reduce benefits by up to 22.4%
- Use a different index to calculate the annual cost-of-living adjustment.
Why This Matters for You
Based on past Congressional action, any future changes would likely affect future beneficiaries and have a relatively small effect on those already receiving benefits. While neither Social Security nor Medicare is in danger of disappearing, it is important to ensure your JRB Retirement Plan contributions are sufficient to prepare you for changes in Social Security and Medicare that may reduce your future benefits.
Sign up for a complimentary financial consultation to determine if you are on track. Call the JRB at 888-JRB-FREE (572-3733) to set one up. View a combined summary of the 2025 Social Security and Medicare Trustees Reports.
September 2025