Social Security’s Long-Term Solvency Problems (and Solutions)

By: Michael Carbone, CFA, CFP®

The long-term solvency of the Social Security (S.S.) retirement system has been a perennial issue, and for good reason—so many retirees depend on this income.

The Future of Social Security With No Reform

For those unfamiliar with how Social Security functions, the program is designed to work as a “pay-as-you-go” system. This means that workers (and their employers) pay FICA payroll taxes on their income. These tax revenues are then used to pay retiree’s their S.S. benefits:

  • If there are more in tax revenues collected than are needed to pay retirees their benefits, the surplus accumulates in a trust1 and is invested to earn interest. This interest is used to further the program’s income.
  • If there are less in tax revenues collected than are needed to pay retiree’s, the difference is then taken from the trust.

As the baby boomer generation retires, the growing ratio of retirees to workers is depleting the trust’s reserves, and this trend is expected to persist.

So, what does this mean for retirees? As it stands, it’s expected that the trust will be spent down by 2033-2034. So, in the next decade, the program will essentially be forced to rely exclusively on payroll taxes for paying retirees their benefits.

The net of all of this is that if no changes are made, it’s projected that there will be enough tax revenues to pay retiree’s ~77-80% of their S.S. benefits2.

Fixing the Problem

We've discussed the need for changes to ensure continued benefits for retirees. Two main approaches to improve the program's long-term financial stability are to:

  1. Reduce current and future benefits for retirees, or
  2. Increase tax revenues for current workers

Although there’s no way to know for sure, it’s objectively more likely to be some combination of changes as opposed to a single change that affects one group. To prepare for retirement, I believe it's crucial to understand the changes being considered by the OASDI trustees, the experts who lawmakers may rely on.

If you’re interested in learning more about the detailed potential changes being proposed, please feel free to watch a video I’ve created on the topic here:

Also, if you feel that you’d benefit from a second opinion of your retirement goals – answer a few questions to see if you may be a good fit for a complimentary consultation.

I wish you the best of luck and hope to hear from you soon!


1 The “trust” I’m referring to is the OASI trust i.e., the “Old Age Survivor Insurance” trust. This is the program’s official name.

2 2023 OASDI Trustee’s Report

Important Disclosures

Eppolito Financial Strategies, LLC. is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc

Any opinions are those of Michael Carbone - not necessarily those of Raymond James. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that is accurate or complete. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

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