Social Security cuts must happen: How much needs to be slashed from monthly checks?
The latest annual report from the Board of Trustees of the Social Security Trust Funds delivers a sobering conclusion: Without prompt legislative action, Social Security will be unable to pay full benefits by 2034. That’s just nine years away.
Experts now say the program must reduce benefits, raise payroll taxes, or do both to preserve long-term viability, as over 70 million Americans rely on Social Security and 185 million workers contribute to it.
Funding shortfall and insolvency projections
According to the 2025 Trustees Report, the combined Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds—referred to together as OASDI—will see their reserves depleted in 2034. When that happens, incoming revenue will only be enough to cover 81% of scheduled benefits. The OASI Trust Fund alone will be exhausted a year earlier, in 2033, resulting in only 77% of promised benefits being payable.
Social Security has not collected enough revenue to cover its total cost since 2021, and the gap between income and expenses is widening. The total cost in 2024 reached $1.485 trillion, while the program only brought in $1.418 trillion. Trust fund reserves fell by $67 billion over the year.
Options on the table: Benefit cuts or tax hikes
To close the projected 75-year funding gap, the Trustees lay out stark options:
- An immediate and permanent 3.65 percentage point increase in the payroll tax rate, raising it from 12.4% to 16.05%
- A 22.4% across-the-board cut in all current and future benefits
- A 26.8% cut if reductions only apply to new beneficiaries starting in 2025
- Some hybrid of the two
If action is delayed until the projected insolvency year of 2034, the necessary changes would be even more severe:
- A 4.27 percentage point payroll tax hike
- A 25.8% benefit cut for all recipients
Drivers of the deficit
Several long-term trends are accelerating the crisis:
- An aging population is increasing the number of beneficiaries faster than the number of contributing workers.
- Fertility rates remain below replacement levels, weakening the future worker base.
- The Social Security Fairness Act of 2023, which expanded benefits by repealing two key offsets, has added new costs to the system.
The report also notes that trust fund interest earnings have declined, contributing less to overall income. In 2024, just 4.9% of trust fund income came from interest.
The demographic shift
In 2024, approximately 68 million Americans received Social Security benefits:
- 54 million were retirees and their dependents
- 6 million were survivors of deceased workers
- 8 million were disabled workers and their families
Meanwhile, 184 million workers paid payroll taxes, but the ratio of workers to beneficiaries is falling. The program’s cost has increased faster than taxable payroll since 2008 and is expected to continue doing so until around 2040, after which the cost curve will level off but remain elevated.
Long-term impact and policy urgency
The 75-year actuarial deficit—the gap between scheduled benefits and projected income—now stands at 3.82% of taxable payroll, up from 3.5% in last year’s report. The open-group unfunded obligation is estimated at $25.1 trillion in present-value terms. These metrics reflect worsening solvency and the growing burden on future taxpayers or beneficiaries.
The Trustees stress the need for swift action, noting that early reforms would allow for more gradual changes and give workers time to adjust. Delays would require more abrupt and painful policy shifts.
“Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits,” the report warns.
Political implications
Any attempt to reduce Social Security benefits is politically sensitive. Still, the math is clear: the longer lawmakers wait, the more dramatic the eventual changes will need to be. Proposals to address the shortfall have included lifting the payroll tax cap, adjusting the benefit formula, or introducing means-testing for higher-income recipients.
Yet none of these options have gained significant traction in Congress. The 2023 Fairness Act demonstrates how political momentum often moves toward expanding, not cutting, benefits—even as the system teeters toward insolvency.
What happens next?
Without a bipartisan legislative deal, automatic benefit cuts will kick in once the trust fund is exhausted. For retirees, that could mean smaller checks; for younger workers, diminished expectations of what Social Security will provide.
The Trustees recommend Congress act “in a timely way” to phase in necessary changes. Whether that comes in the form of higher taxes, lower benefits, or sweeping reforms remains to be seen.