Kathryn Pomroy
Will Social Security run out of money before you retire? What about Medicare? There’s not much good news regarding the Social Security and Medicare trust funds, which help pay for these benefits. But relax; you should know that neither program is expected to stop paying benefits altogether, no matter when the trust funds turn insolvent.
The trust funds are primarily funded by current tax payments. So, unless everyone stops working and paying taxes, beneficiaries will continue to receive some Social Security benefits and Medicare coverage.
The 2025 annual Social Security and Medicare trustees report, released June 18th, provides the latest projections.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
When will Medicare and Social Security run out?
The Hospital Insurance fund for Medicare Part A is expected to be able to fully pay scheduled benefits until 2033, three years sooner than last year’s projection, according to a recently released report. When the trust fund is depleted, program tax income is expected to be sufficient to pay 89% of projected benefits.
The Disability Insurance Trust Fund is in the best shape of the three trusts. That fund is projected to be able to pay 100% of scheduled benefits through at least 2099, which is as far out as the report projects. In other words, it’s not expected to run out of money at all. This is an extension of last year’s projection, which also didn’t predict the fund running out of money before 2098, the last year of that report’s prediction period.
Now for the not-so-good news: The Old-Age and Survivors Insurance Trust Fund that pays Social Security retiree benefits is projected to run out in 2033, according to the latest estimates by the trustees. This is the same year as predicted last year; however, the estimated depletion date moved up three calendar quarters to the first quarter of 2033. If this comes to pass, benefits would face a 23% cut, and beneficiaries would then receive 77% of their benefits.
What made the projections change?
Trustees for Social Security revised their projections based on updated inflation and economic output data. They maintained their projected levels of gross domestic product and labor productivity from last year. The Hospital Insurance fund projection was decreased due to higher-than-expected spending on hospital and hospice care in 2024. The trustees also increased future projected spending to account for that growth, including more spending for inpatient and hospice services in the early years of the projection.
According to the Center on Budget and Policy Priorities, a bipartisan Social Security financing deal in 1983 enabled Social Security to run a surplus each year until 2021. Then, in 2021, Social Security’s total cost exceeded its income, and it began to pull funds from reserves.
The trust funds’ reserves supplement the program’s income — from payroll taxes, income taxes on benefits paid to higher-income beneficiaries, and interest earned on the trust funds’ bonds — allowing Social Security to keep paying full benefits until the reserves are depleted.
Contrary to the fears of some retirees, benefits will not cease if Social Security’s trust funds run out of Treasury bonds to cash in. Money from income taxes would enable Social Security to continue paying about 77% of benefits.
Why are the funds inadequate?
According to the Bipartisan Policy Center 2025 trustee report, demographics are a big reason for the coming Social Security shortfall. There are fewer workers paying taxes to support retirees. The ratio of workers paying Social Security payroll taxes to people drawing benefits has dropped from four-to-one in 1965 to just under three-to-one in 2022. And is projected to drop to less than 2.5-to-one by the middle of the century. About one out of every five U.S. residents, or 67 million people, collected Social Security benefits in February 2023, according to the Center on Budget and Policy Priorities. That number has increased to 69.628 million people in May of 2025.
Another issue, according to the latest Social Security Trustees report, has to do with income disparities and the cap on the amount of income that is taxed for Social Security. Social Security’s payroll tax, which covered 90% of total earnings in 1983, is projected to cover just 83% this year. This is because top earners' income has grown much faster than lower earners, placing more earnings above the taxable cap of $176,100 in 2025.
Proposals to bolster the trust fund and save Social Security range from increasing taxes on higher-income earners to raising the retirement age.
Recent changes to Social Security are accelerating the insolvency
We are at the tail end of raising our full retirement age to 67. I raise this point because raising the full retirement age from 65 to 67, albeit gradually, was an important aspect of shoring up the Social Security trust fund back in 1983 when the Social Security Amendments of 1983 were passed. That's right, we are in the final stages of the 42-year phase-in of legislation passed in 1983.
The Social Security and Medicare trust funds are in trouble, and as of late, the politicians are only making the problem worse. Both Presidents Biden and Trump signed legislation that will accelerate the insolvency date of the Social Security trust funds.
President Biden signed the Social Security Fairness Act, which resulted in higher payments for certain public sector employees. President Trump's signature legislation, the One Big Beautiful Bill Act (OBBBA) will reduce money flowing into the trust by reducing the taxability of benefits for older Americans with income below a certain threshold.
The Social Security Fairness Act. Another important provision passed in 1983 was the Windfall Elimination Provision (WEP), which reduced Social Security payments to those who received pensions from the federal and state/local governments. However, this, along with the Government Pension Offset (GPO), was repealed in 2025 and will contribute to the depletion of the Social Security trust fund by increasing payments to certain beneficiaries. When the bill was scored by the Congressional Budget Office, it said the SSFA will cost approximately $195.7 billion over ten years and the balance of the Social Security retirement and survivor trust fund could be exhausted roughly half a year earlier than it would have been under previous law.
The One Big Beautiful Bill Act. The new bill, which was signed into law on July 4, 2025, impacts the solvency of the Social Security and Medicare trust funds by reducing tax revenue that goes to the trust funds. The reduction in taxation of benefits will "reduce total taxation of benefits by roughly $30 billion per year," according to the Committee for a Responsible Budget. Most importantly, the group projects that the insolvency of the Social Security Old-Age and Survivors (OASI) trust fund will accelerate from early 2033 to late 2032; insolvency of the Medicare HI trust fund would move up from late 2033 to mid-2032.
In terms of the issue of insolvency, the politicians are moving the needle in the wrong direction.
Note: A version of this item first appeared in Kiplinger’s Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.
Related Content
-
I'm want to give my 3 grandkids $5K each for Christmas.You're comfortably retired and want to give your grandkids a big Christmas check, but their parents are worried they might spend it all. We ask the pros for help.
-
If You're Not Doing Roth Conversions, You Need to Read ThisRoth conversions and other Roth strategies can be complex, but don't dismiss these tax planning tools outright. They could really work for you and your heirs.
-
Could Traditional Retirement Expectations Be Killing Us?A retirement psychologist makes the case: A fulfilling retirement begins with a blueprint for living, rather than simply the accumulation of a large nest egg.
-
I'm Retired and Want to Give My 3 Grandkids $5,000 Each for Christmas, But Their Parents Don't Want Them to Spend It All.
You're comfortably retired and want to give your grandkids a big Christmas check, but their parents are worried they might spend it all. We ask the pros for help.
-
I'm a Financial Planner: If You're Not Doing Roth Conversions, You Need to Read This
Roth conversions and other Roth strategies can be complex, but don't dismiss these tax planning tools outright. They could really work for you and your heirs.
-
Could Traditional Retirement Expectations Be Killing Us? A Retirement Psychologist Makes the Case
A retirement psychologist makes the case: A fulfilling retirement begins with a blueprint for living, rather than simply the accumulation of a large nest egg.
-
I'm a Financial Adviser: This Is How You Can Adapt to Social Security UncertaintyRather than letting the unknowns make you anxious, focus on building a flexible income strategy that can adapt to possible future Social Security changes.
-
The Stoic Retirement: Ancient Wisdom for Today’s Biggest Life TransitionA "Stoic retirement" doesn't mean depriving yourself. It's a character-based approach to life and aging that can bring calm and clarity.
-
11 Outrageous Ways To Spend Money in RetirementWhether you have excess cash to spend or want to pretend, here’s a look at 11 ridiculous ways retirees can splurge.
-
I'm a Financial Planner for Millionaires: Here's How to Give Your Kids Cash Gifts Without Triggering IRS PaperworkMost people can gift large sums without paying tax or filing a return, especially by structuring gifts across two tax years or splitting gifts with a spouse.
-
'Boomer Candy' Investments Might Seem Sweet, But They Can Have a Sour AftertasteProducts such as index annuities, structured notes and buffered ETFs might seem appealing, but sometimes they can rob you of flexibility and trap your capital.
