Social Security Faces Its Biggest Overhaul in Decades — Here’s When

If you’ve been paying attention to Social Security news, you may have heard that the program is on a path to financial ruin.

Social Security is not in danger of disappearing completely. But thanks to an impending revenue shortfall, Social Security’s Trustees are warning that benefit cuts may be on the horizon within the next decade unless the program undergoes a major overhaul.

Here’s what to expect as far as Social Security cuts are concerned — and what changes may be coming pretty soon to prevent them.

When Benefit Cuts Could Arrive

Last year, the Social Security Trustees gave an update on the state of the program’s finances. And the news wasn’t good.

The Social Security Old-Age and Survivors Insurance (OASI) Trust Fund, which is where retirement benefits are paid from, only has enough reserves to pay 100% of scheduled benefits through 2033. Once the OASI Trust Fund is depleted, retirement benefits could face a 23% cut.

The Social Security Disability Insurance (DI) Trust Fund, meanwhile, can pay 100% of scheduled benefits on its own through at least 2099.

If the OASI and DI trust funds were to be combined, Social Security would be able to pay 100% of scheduled benefits through 2034. But from there, benefits could face a 19% cut.

That sort of cut could be catastrophic to the people who rely heavily on Social Security for income. So it’s in lawmakers’ best interest to try to prevent that from happening.

Changes That Could Come Soon to Prevent Social Security Cuts

Lawmakers have a number of changes they could make to avoid Social Security cuts. First, voting to combine the OASI and DI Trust Funds could at least potentially stave off retirement benefit cuts a bit longer.

Secondly, lawmakers could vote to make changes to the way workers are taxed on their income to pump more money into Social Security. Those changes could include raising the current 12.4% Social Security tax rate or raising or eliminating the Social Security wage cap, which currently states that earnings beyond $184,500 are not subject to taxes to fund the program.

Lawmakers could also make changes to the program’s benefit-claiming rules. Right now, full retirement age, FRA, for Social Security is 67 for anyone born in 1960 or later. Lawmakers could vote to push FRA to 68 or 69 to better preserve the program’s cash flow.

Lawmakers could even go to the extreme of requiring that Social Security recipients pass a means test, which could result in high-income retirees not receiving benefits (or not receiving them in full). This change would no doubt be met with controversy, though, since Social Security is not meant to be a welfare program. Rather, it’s supposed to be a program that all workers who pay into benefit from.

It’s too soon to know exactly what changes may be coming to Social Security in the next few years. But if lawmakers don’t make any changes, benefit cuts are pretty much inevitable. And that could be downright disastrous.

As such, it’s reasonable to expect Social Security to look different within the next decade. Exactly what that means is yet to be determined.