Social Security Solvency: What the Latest Report Means for Advisors and Clients

Each year, the Social Security and Medicare Trustees release their annual reports, and this year’s findings have moved up the timeline on when these critical trust funds will no longer be able to pay full benefits. According to the 2025 report, the combined Social Security trust funds will become depleted in 2034, a year earlier than last year’s projection. At that point, payroll tax revenue will only be enough to cover about 81% of scheduled benefits.

Medicare’s hospital insurance trust fund is also under pressure, with its “go-broke” date moving up to 2033. Rising health care costs and recent legislation increasing Social Security benefit levels have contributed to the accelerated timelines.

The headlines sound dire, but the reality is more nuanced—and it’s essential that financial professionals help clients cut through the noise.

What “Insolvency” Really Means

One of the most common misconceptions is that Social Security will disappear once the trust fund reserves are depleted. That’s not the case. Even if no reforms are enacted, the system will still be able to pay most benefits from incoming payroll taxes—about 79 to 81 cents on the dollar.

In other words, while the challenge is real, clients should not assume they’ll receive nothing. Instead, the risk is reduced payments if Congress fails to act.

Why Solvency Is a Challenge

Several factors are driving this funding gap:

• Demographics: Americans are living longer while birth rates remain low, leaving fewer workers to support more retirees.

• Policy Changes: The repeal of the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) increased benefits for some workers, putting additional strain on the trust funds.

• Healthcare Costs: Medicare expenditures are rising faster than wage growth, intensifying pressure on both programs.

Potential Reforms

Lawmakers have a range of policy levers available, most of which would focus on younger generations rather than those already retired or near retirement. Options include:

• Gradually raising the full retirement age from 67 to 68 or even 70.

• Delaying the earliest filing age beyond 62.

• Increasing payroll taxes, either by raising the FICA tax rate or eliminating the wage cap (currently $176,100 in 2025).

• Adjusting benefit formulas to reduce payouts for higher earners while protecting lower-income beneficiaries.

Guidance for Advisors

Clients are already seeing headlines that may spark anxiety. Here are three key points to emphasize:

1. Social Security is not going bankrupt. Even in the worst-case scenario, most benefits will still be paid.

2. Changes are coming. Younger generations should prepare for adjustments in retirement age, tax contributions, or benefit formulas.

3. Planning matters. The earlier clients integrate these possibilities into their financial strategies, the more resilient their retirement plans will be.

At NSSA®, we believe the system will be protected because it’s too vital to fail. More than 69 million Americans rely on Social Security today, making reform not just likely but inevitable. And the sooner changes are enacted, the less severe they need to be.

For financial professionals, staying informed on solvency projections and policy proposals isn’t optional—it’s a responsibility. Our training and member resources are designed to equip you with the knowledge and communication strategies you need to keep clients confident and prepared.