The Future of Social Security: What You Need to Know
- Holzberg Wealth Management
- Sep 25
- 7 min read
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If you have been following the news about Social Security, you have likely seen alarming headlines about trust funds running out of money and benefits disappearing. Clients of all ages have been asking us: Will Social Security still be there for me?
Retirees who are already collecting benefits want to know if those checks might suddenly stop or be reduced to the point where they would have to rely more heavily on their savings. People approaching retirement worry about whether the benefits they have factored into their planning will actually arrive. And younger workers, many of whom are already skeptical, question whether Social Security will even exist by the time they retire.
Let’s cut through the noise and look at what is actually happening with Social Security. The challenges are real and the stakes are high, but the reality is more nuanced and far less dire than the headlines often suggest.
How Social Security Actually Works
At its core, Social Security is a “pay-as-you-go” system. The money you pay into the program today is not being set aside for your own retirement – it is being used to pay benefits to today’s retirees and other recipients. Most of this funding comes from payroll taxes: workers and employers each contribute 6.2% of wages, for a combined 12.4%, up to an annual wage cap. In 2025, that cap is $176,100, meaning income above that level is not subject to Social Security tax, and you do not earn additional benefit credits on those dollars. The cap rises each year with inflation, but it also creates one of the most frequently discussed levers for reform: Congress could raise or eliminate the cap to increase revenue.
In addition to payroll taxes, Social Security also collects revenue from taxes on benefits and interest earned on the trust funds. Those trust funds are essentially accounting mechanisms that hold the surplus from years when Social Security took in more than it paid out. There are two of them:
The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivor benefits, and
The Disability Insurance (DI) Trust Fund, which pays disability benefits.
By law, these funds are separate, though they are often discussed together in reports as the combined “OASDI” program. The OASI fund is the one that faces the most immediate strain, with reserves projected to run down by 2033, while the DI fund is expected to remain solvent for the next 75 years.
What Is Really at Risk?
Between 1984 and 2009, payroll tax revenues actually exceeded benefits paid out, leading to a surplus that built up the trust fund reserves. But demographics have been shifting. The large baby boomer generation is retiring, people are living longer, and birth rates have declined. As a result, more people are collecting benefits while fewer workers are paying into the system relative to the number of beneficiaries.
Since 2010, Social Security has been paying out more in benefits than it collects in payroll taxes, so it has been drawing down those trust fund reserves to make up the difference. That is what people mean when they say Social Security is “running out of money.” What is actually running out are those trust fund reserves, not the payroll taxes that fund most of the system.
As long as people are working and paying into Social Security, the system has revenue to pay benefits. According to the Social Security trustees, even if the OASI trust fund is depleted in 2033, the program would still be able to pay nearly 80% of scheduled retirement benefits. Put simply, the worst-case scenario – even if Congress does nothing – is that almost four-fifths of benefits would still be paid out for the rest of the century. Social Security cannot “go bankrupt” in the way a private savings account can.
What Reforms Might Look Like
Social Security does face a funding shortfall, but there are well-understood ways to address it. The last major reform occurred in 1983, when Congress took action just months before the system would have been unable to pay full benefits. At that time, lawmakers:
Raised payroll taxes.
Gradually increased the full retirement age from 65 to 67 (but only for younger workers).
Expanded coverage to include federal employees.
Made part of Social Security benefits taxable for higher-income retirees.
These changes were phased in gradually, which offers a precedent for how future reforms might unfold. Several options are frequently discussed today, including:
Raising the payroll tax rate. A 3.3 percentage point increase would be enough to close the long-term shortfall.
Lifting or eliminating the wage cap (currently $176,100 in 2025), so higher earners pay Social Security taxes on more of their income.
Increasing the full retirement age again, perhaps from 67 to 68 or 69, phased in over time.
Adjusting cost-of-living increases (COLAs), either by using a slower-growing inflation measure or by switching to an index that better reflects seniors’ spending.
Slowing the rate of benefit growth for higher earners, while preserving benefits for lower-income workers.
The important point is that Social Security is not out of options. Lawmakers have a wide range of tools, and the most likely outcome is a package of reforms that spreads the responsibility fairly, while protecting those most dependent on benefits. The sooner action is taken, the smaller and more manageable the changes will need to be. But even if Congress waits, as it did in 1983, history shows that leaders step in when the program nears a breaking point.
How We Can Plan Together
Uncertainty about Social Security doesn’t have to translate into fear. One of the most helpful things we can do in financial planning is to build scenarios around different outcomes. For example, we often model retirement plans assuming a 20% reduction in benefits. In many cases, even with that adjustment, the plan still works. And when it does not, we can identify the specific steps needed to stay on track.
We also make sure you are not overly reliant on Social Security alone. By creating diversified income strategies – drawing from savings, investments, pensions, annuities, or even part-time work – we build retirement plans that are resilient, regardless of what happens in Washington.
Timing decisions also matter. The age at which you claim Social Security can add tens of thousands of dollars to your lifetime benefits, and we can help you compare the options to find the right strategy for your circumstances.
Finally, we closely monitor policy changes. Each year brings updates to the rules, whether it is the cost-of-living adjustment, the earnings test, or the retirement age. Staying informed ensures you do not miss opportunities or get caught off guard by shifts that affect your benefits.
The Bottom Line
Social Security is not disappearing. While adjustments are likely in the coming years, the program will remain a cornerstone of retirement income for decades to come. The best step you can take is to plan with realistic assumptions and stay flexible. That way, no matter what happens in Washington, your retirement can remain secure. And that is exactly what we are here to help you do.
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About the Author
Holzberg Wealth Management is a family-owned and operated financial planning and investment management firm based in Marin County, CA. As your financial advisors, we serve you as a fiduciary and are fee-only, so we never receive commissions of any kind. We help individuals and families like you in the greater San Francisco Bay Area and nationwide with the financial decision-making process to organize, grow, and protect your assets.
** This writing is for informational purposes only. The author and Holzberg Wealth Management do not guarantee or otherwise promise any results that may be obtained from using this report. No reader should make any investment decision without first consulting their financial advisor and conducting their own research and due diligence. These commentaries, analyses, opinions, and recommendations represent the personal and subjective views of the author and do not constitute a recommendation, offer, or solicitation to make any securities transaction. The information provided in this report is obtained from sources that the author believes to be reliable. External links to third parties are being provided for informational purposes only. Holzberg Wealth Management is not affiliated with the third-party websites linked to, unless otherwise explicitly stated, and does not constitute an endorsement or approval by Holzberg Wealth Management of any of the third party’s products, services, or opinions. Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Any charts and graphs provided are hypothetical and for illustrative purposes only, are not indicative of any investment, and assume reinvestment of income and no transaction costs or taxes.
