2025 Social Security Trustees Report—Impact of a 23% Cut in Your Benefits

What’s different from last year?

Turns out, that’s the same projection as in last year’s report. The trustees estimated the retirement trust fund would be on track to pay 100% of benefits through 2033. This year’s report moves up the depletion date by about 9 months, to early 2033 rather than at the end of the year.

But there is a lot more to consider this year. Namely, Social Security locked in the data set at the end of December 2024. That was during the Biden Administration. You may have noticed we are in a new world with the current administration.

It is important to know about this year’s findings, and I will cover that in this post. But frankly, it’s much more important to focus on the implications of these projections and the timeline. It’s important to dive into the new information since December. And to address the Congress’s abdication and how their inaction will affect your personal retirement security and legacy plans.

Social Security’s demise makes it to Wait, Wait…Don’t Tell Me!

It had been four days since the 2025 Social Security Trustees Report hit the news wires. I woke up on Saturday)listening to the popular public radio show, Wait, Wait…Don’t Tell Me. It’s a funny news recap show that airs on hundreds of public radio stations around the country. Each week, Peter Sagal and three comedians highlight the most important news stories from the week.

They tape the show in front of a live audience on Thursdays. Dan and I recently attended a live taping in Boston. It was great fun to see the team in action. And so interesting to see how the producers put together the show. We were in a grand theatre with a couple thousand people sharing the experience.

What caught my attention this morning was a question in the news lightning round. Peter asked something like, “What government program is slated to run out of funds in just 8 years?” The comedian knew the answer was Social Security.

So, the report came out at noon on Wednesday. One day later the Wait, Wait team thought this news was important enough to include in the show. That’s bad news from my point of view.

Topline findings in the 2025 Social Security Trustees Report

The fact Social Security’s demise is making it into popular culture—and the comedians know about it a day after it hits the press—signals a big problem. And it is a problem only Congress can solve. But right now, the majority party apparently has other pressing matters.

Remember Social Security is a law. It’s over 3,900 pages long and includes laws of four trust funds. Plus, Medigap Plans and Medicare Part C (so-called advantage plans) are included. The Social Security laws are complicated to say the least. Medicare is about 100 times more complicated.

In this 2025 Social Security Trustees Report, key findings include…

Medicare Part A—This is the HI, or Hospitalization, trust fund. It’s on a path to run out of reserves three years earlier than expected in last year’s report. The report estimates the reserve account will be depleted in 2033. The HI trust funding comes from your payroll or FICA taxes. It’s been running at a surplus for a number of years. But is now tapping its rainy-day fund to pay hospital expenses. Part A also pays for skilled nursing stays and hospice. Using up reserve assets is caused by higher increases in real costs at the hospital or skilled nursing facilities.

Social Security retirement benefits—This is the OASI or Old Age and Survivors trust fund. Social Security is on track to pay 100% of its obligations to retirees and survivors until 2033. That’s the same as last year. However, the reserve fund will run dry earlier in 2033 than estimated last year. Moving to the first quarter of 2033, rather than depleting at year end. The faster depletion is due to payments required under a new law, the Social Security Fairness Act of 2024. And to some key actuarial demographic and income projection changes.

…plus additional information on these two trust funds

Disability Insurance—This is the DI trust fund. It has sufficient reserve funds to carry on for decades. But read into that how very difficult it is to qualify for disability. Folks only become eligible for SSDI when they cannot work in any capacity for a year or more. Or are expected to die from their disability.

SMI Trust Fund—This is the Supplementary Medical Insurance trust fund. We know this as Medicare Part B and Part D. Part B pays for doctors, outpatient services, and durable medical equipment. Part D helps you with prescription costs. Because this trust is funded by general tax revenue plus monthly premiums from beneficiaries, it is sustainable. While healthcare costs increase faster than inflation, this trust fund is structured to handle the increases at this time.

Understanding a trust fund’s distinct parts

Each trust fund has two distinct parts. In the case of OASI, money comes in daily from employers required to pay FICA or payroll taxes. That money goes into the “checking account” side of the trust fund. Then, current retirees and survivors are paid monthly. They receive 100% of the calculated benefit due to them.

Since 2021, the OASI trust fund has been running a deficit rather than a surplus. That means current beneficiaries are still getting paid their 100% benefit amount. However, it’s being funded by both incoming payroll taxes and by tapping into the Reserve Account.

The 2025 Social Security Trustees Report anticipates the Reserve Account will be fully used up by 2033. At that time, incoming payroll taxes will only be sufficient to pay retirees 77% of their benefit.

A look at OASI funding from the 2025 Social Security Trustees Report

This is why it is essential that Congress takes action to address the funding problems. When the reserve fund is fully depleted—in early 2033—there is no other bucket ‘o money to tap. There will be incoming payroll taxes, taxes due on Social Security, and interest on the reserve account.

From the 2025 Social Security Trustee Report, you can see the makeup of the OASI trust fund:

But as the Reserve Account dwindles, so does the interest generated on the investments. Here is a look at the current balance sheet of the OASI trust fund. The benefits paid exceed the incoming income. The $2.54 trillion Reserve Account funds the shortfall.

Those are the only allowable funding sources. By law. Unless Congress decides to change the funding sources, or allow for borrowing by the OASI trust fund, the shortfall is significant.

What can possibly go wrong with the funding sources?

Take a look again at the funding sources. Then pull in the reality of what has been happening since the new administration took office and you’ll see that:

• Payroll taxes are 90% of the funding today. But that’s based on the income projections from the end of 2024. With the dismantling of our immigration policy and deportation of existing immigrants, the sheer number of employees is dropping fast. Fewer employees mean less payroll taxes into Social Security.
• Now consider the tariff problem inflicted by the current president. Will there be ongoing tariffs or not? Who knows? But the effects of the uncertainty are already being felt. Businesses have slowed hiring or are cutting jobs. Cuts usually come from the older, higher-paid employees. Again, fewer employees at lower wages mean less payroll taxes collected.
• A small but mighty piece of Social Security’s funding is taxation of benefits. As more and more scared near-retirees claim their benefits too early, they lock in a lower monthly income. Smaller income equals smaller tax payments into the trust fund.
• Last but not least is interest earned on the reserve account. When there is a smaller and smaller pot to invest, interest income dwindles. Well before 2033 this funding source is reduced to a mere trickle.

2033 is only 8 years away

When the Trustees report was released last year, we all talked about the reserve fund being depleted in “about 10 years.” We talked about how Congress really needed to get a move-on and take action to fix the underlying problems. But they still had some time.

And many of us were delightfully surprised in January when President Biden signed the Social Security Fairness Act into law. It looked like the people who represent us were going to focus on Social Security. They were finally going to address the dozens of good options already proposed to shore up this crucial program. These changes would shore up the Reserve Accounts. Social Security improvements were moving forward. It was looking promising. And hopeful.

All that changed in February. The DOGE boys (so-called department of government efficiency) entered and wreaked havoc on the Social Security Administration. They took a sledgehammer to this operation critical to sending over 69 million payments every year. People in retirement, and those of us on the cusp, were scared.

Then, the 2025 Social Security Trustees Report comes out with early 2033 as the reserve fund depletion date. Suddenly, 8 years is much shorter than “almost 10.” It is just around the corner. And everyone knows it. Including the comedians.

Are you prepared to replace 23% of your Social Security income?

So, we’re in a bit of a pickle here. Turns out 2033 is not really the expected “run out of reserves” year. Recent analysis by the Center on Budget and Policy Priorities is much more realistic about the danger we’re facing. We could be running aground in FIVE years. That’s in 2030. And that is a heck of a lot closer than 8 years.

When the Reserve Account is depleted, the experts anticipate there will be enough coming in from workers to meet 77% of the obligations. In other words, each person’s Social Security benefit will be reduced 23%. Effective all at the same time—for all beneficiaries receiving payments today and going forward.

In the simplest of terms, here’s how much less you could receive:

Are you preparing to find an additional amount of income to cover this possible shortfall?

But won’t I be grandfathered in if I’m already receiving benefits?

Why should someone who has been getting Social Security benefits be any more or less important than the new folks coming in? Social Security is a program based on fairness. It would not be fair to keep an older person’s benefits intact while reducing or eliminating a newer person’s benefits. Keep in mind, if there were a preferential group getting full benefits, the cut to new entrants would not be 23%. Their benefits would be completely eliminated.

The math is actually simpler than you may realize. The OASI trust fund literally works like your own checking account. When you don’t have sufficient cash in that account and write a check, what happens? The check bounces.

You aren’t bankrupt. You are simply out of cash. And you’ll have to refuel the tank. The problem for the Social Security trust fund is there is currently no way to refuel the tank. The law does not allow any outside funds.

Follow the foghorn

Congress has got to get focused on solutions. They need to start implementing some of the proposals that have been considered for two decades. You’ve heard this from me before and you’ll hear it again. It is up to each one of us to communicate often with our House members and senators. Over and over again until they clearly hear us.

I shared in a previous post that it needs to be all hands on deck to help Congress focus on the social safety nets for our oldest citizens. I wasn’t kidding.

I’m concerned 

You know I’ve been in the guts of Social Security for over 20 years now. I dig into the nuances of the law and the calculations. I write extensively about Social Security. I’m revising my Social Security book with a new title and updates for where we are today. (Announcement to come this fall…)

One thing I have been clear about for 20 years: the program needs some adjustments. But similar to the 1980s, I have been confident that Congress would continue to drag their heels. Then overnight they’d release a 500-page set of amendments.

This is the first time I’m wavering. Ever. And it’s not because the reserve account will run dry by 2033. Instead, it’s likely to be depleted in 2030. But that’s not it. Rather, it’s the utter disfunction of our US Congress.

Taking action

At the end of the day, the fate of Social Security lies in the hands of the lawmakers. The Congress. And they are doing nothing. So, how can we change that?

1. Call, call, and call again your representatives.
2. Run or rerun your retirement income plan to see the implications to your own income and the faster depletion of your personal assets.
3. Reassess your legacy plans. Will you really be able to leave as much to your kids and grands as you thought you would?

I am not one to sound the alarm. Or cry wolf. In fact, I’m the one who’s been railing against the media to stop crying that Social Security is going bankrupt. But now is different. And not different good.

Resources for contacting your representatives

Not sure how to contact your representatives in Congress? No worries, just check by your zip code at https://www.congress.gov/contact-us

AARP is by far and away the best advocate for older Americans and the support and services we deserve. In the coming weeks, AARP members from around the country will be paying Congress a visit in Washington. Get updates here: https://www.aarp.org/videos/advocacy/6374523417112/

Also from AARP, an email template and content that you can send to your representatives: https://action.aarp.org/secure/tell-congress-protect-and-save-our-social-security

Find good messages to leave your Congress members. You don’t have to invent your messages, the folks at 5Calls have already done it for us: https://5calls.org/