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The 2024 edition of the annual report of the Social Security trustees [ [link removed] ] was released on May 6, 2024, and its conclusions are sobering. Approximately 21% of scheduled benefits lack funding, a figure that includes future payments for current beneficiaries. If corrective action is much further delayed, continued solvency will be for all practical purposes unachievable, meaning that the current design of Social Security will need to be abandoned. If that happens, it will not be because Americans signaled a desire to scrap Social Security’s current structure, but because lawmakers dithered past the point where repairs could fix the problem. This would be a scandalous abdication of public responsibility.
It’s important first to step back and remember what the trustees’ reports are meant to tell us. They are not just an abstract accounting exercise, but instead convey the magnitude of the changes needed to maintain Social Security in its current form. That form is of a contributory insurance program that provides income to an insured worker who departs the workforce due to old age or disability. It is financed via separate payroll taxes that are tracked in dedicated trust funds, apart from the rest of the federal budget.
Social Security is not welfare; workers rich and poor alike contribute payroll taxes to it, rich and poor alike are eligible for benefits and individuals’ benefits are a mathematical function of their previous contributions. Benefits by law are paid only from the trust funds, not from the government’s general fund. This allows beneficiaries to assert that they earned and paid for their benefits (at least in the aggregate), unlike welfare programs wherein some people get benefits based on their need without paying taxes, while others pay taxes without ever becoming eligible for benefits. Social Security’s unique design renders its payments more secure and reliable than welfare benefits. This design also means that the program’s surrounding politics are fundamentally different as well. In welfare, the terms of eligibility are constantly renegotiated because of the collision of interests between recipients and taxpayers. By contrast, Social Security participants can count on their benefits because of the shared perception that they have been earned.
There is, however, a price for Social Security’s unique position among federal programs. The system only works as long as lawmakers are willing to align the program’s tax and benefit schedules. If its existing benefit schedule exceeds what existing worker contributions can actually fund, then the program can no longer remain self-funding; it would need financing from the general federal budget like any other welfare program, and the notion that one’s contributions financed one’s benefit would be discarded. This, unfortunately, is where we’re currently headed.
Lawmakers have long permitted benefit and revenue schedules that are widely out of alignment to remain on the books, even though it has been known for decades that this imbalance will lead to insolvency. A minor indexing correction years ago could have fixed the problem in a relatively painless way, but instead it has metastasized to the point where it threatens Social Security’s future. Unless the leaders of both major political parties pivot rapidly from evading the problem to tackling it, Social Security will not survive in its current form.
Important Findings of the Report
Before turning to the report’s important findings, it’s worth a brief digression to note what is not that important in it. Social Security has two trust funds (one for Old-Age and Survivors, and one for Disability), and the specific date on which either is projected to go insolvent—though often treated as the headline finding in articles about the reports—doesn’t matter that much from the perspective of today. What matters is what must be done to maintain Social Security in its current form, not the precise date on which it will be abandoned if lawmakers fail. Overemphasis on the insolvency date fuels misimpressions that it represents the amount of time remaining to solve the problem, when it signifies no such thing. By the time the Old-Age and Survivors trust fund is nearing depletion, even complete elimination of all new benefit claims would be insufficient to maintain solvency. By that point, the game will have long been lost. Thus, the date is essentially irrelevant to what lawmakers need to do to preserve Social Security.
Another item of much less importance to the public interest than to insiders is how much the Social Security outlook has changed from the previous report. As a former trustee, I personally find this interesting (as do many journalists), from the standpoints both of deepening our understanding of the projections, and of focusing on the new over the familiar. But from a public interest perspective, it’s not significant. When a meteor is crashing to Earth, it doesn’t really matter if yesterday you had made a slightly different calculation of how its speed would be affected by air resistance. Similarly, what matters in Social Security is the current problem, not how it compares to last year’s estimates.
That current problem in Social Security finances is dire and urgent. Currently, roughly 21% of all scheduled benefits over the next 75 years are unfunded. But that number includes scheduled benefits for current recipients, which lawmakers have never cut.  Measured as a percentage of future benefit claims, the shortfall is larger—approximately 25%—and growing.
Saying that 25% of future benefit claims are unfunded also understates the problem because there is no plausible likelihood lawmakers would cut benefits 25% across the board for everyone filing claims starting tomorrow. In the real world, any changes would almost certainly be gradually phased in, meaning that the first cohorts affected might only have their benefits changed by a percent or two, with later cohorts who are fully affected experiencing changes far larger than 25%. Furthermore, lawmakers will probably not want to risk increasing senior poverty by cutting low-income participants’ benefits, whether they are current or future participants. Add up these various restrictions, and it becomes clear that the changes needed could amount to 40-50% of the benefits of future claimants with above-average incomes, even if enacted today. These are far greater changes than Americans are currently being told about, and the requirements only grow larger with further delay.
What Must We Do?
Brokering a solution requires fundamental value judgments. First, a judgment must be made as to whether Social Security’s historical design as a self-financing program is worth saving. If the answer is no, then lawmakers can simply avoid tough choices concerning benefit formulas and tax assessments, bail out the system with a massive infusion of general revenues and dispense with the historic design of Social Security as an earned benefit. I would caution against such a move for several reasons. First, it would be fiscally irresponsible, essentially adding Social Security’s large financing shortfall to the mushrooming national debt. Second, it would undermine the security and reliability of Social Security benefit payments, as the program would need to compete for financing each year from the general fund, and participants could no longer claim they paid for their benefits. Third, it would be a betrayal of the public trust, as Americans have given no indication that they wish to toss Social Security’s historical design overboard.
Assuming lawmakers make the value judgment that Social Security’s historical design is worth saving, the next value judgment involves striking the balance between the three approaches of increasing revenues, adjusting eligibility ages and moderating benefit growth. No plausible solution can rely on one mechanism alone. This isn’t solely because bipartisan compromise will be required for political reasons. Even if one party or the other controlled every branch of government, that party still wouldn’t be willing to do the entire job with one mechanism; the changes required are too large. For example, doing it all on the tax side would require the equivalent of an immediate increase in the current payroll tax from 12.4% to 15.73%, something even Congress’ most liberal members would not likely assemble a majority to enact. Nor could even the most conservative members of Congress engineer a majority in favor of cutting all benefit claims, starting tomorrow, 25% across the board. The time is long past when the problem can be realistically solved by either tax increases or benefit growth restraints alone.
This is one reason why the current positioning of so many politicians is so deeply irresponsible. Many members of Congress have declared that not only will they refuse to countenance any moderation of benefit growth or changes to eligibility ages, but they demand that benefits be increased above and beyond the automatic increases that are unaffordable under current law. This simply cannot work; not only because it is unreasonable to worsen the financial shortfall before fixing it, but because lawmakers are manifestly unwilling to raise taxes enough to close the current shortfall, let alone to fund a system where costs are ballooning even faster. When both President Biden and Mr. Trump say they will not touch the growth of Social Security benefits, they are indicating that whoever takes the oath of office next January must either break his campaign pledges almost immediately, or preside over the final throes of Social Security as we know it.
There are three categories of reforms that will almost certainly need to be included in any realistic Social Security rescue. A reasonable place to start the discussion is to examine solutions that consist of roughly one-third tax increases, one-third eligibility age changes and one-third benefit growth restraints.
New tax revenues. An ideal policy would solve most of the Social Security problem through cost constraints rather than increased taxes, for several reasons. Under current law, there are problematic differences in how Social Security treats different generations, with younger generations losing substantial net income through the program [ [link removed] ], and older generations (boomers and Gen Xers) coming out ahead while making no net contribution to solvency. A solution based on tax increases worsens this problem, because it extracts more from the young generations who are already coming out worse. For Social Security to work well, each generation must get comparable treatment, which means boomers need to contribute something more. Since those boomers will mainly be beneficiaries in the future rather than taxpaying workers, they can only effectively contribute through benefit growth restraints. All that said, it’s too late in practical terms to preserve solvency without new revenues. At this point, doing so would require future benefits to decline in real terms, an outcome even the most conservative lawmakers would likely oppose.  
But while tax increases will likely be part of any bipartisan solution, it would be difficult to solve even one-third of the problem this way, let alone half. Political advocates have grossly exaggerated how much solvency can be extended by raising payroll taxes on the rich. Even if the full Social Security payroll tax were applied to every penny of employment earnings in America without limit, it would only eliminate 37% [ [link removed] ] of the program’s permanent annual deficits. Tactically, it would be smart for conservatives to signal flexibility on taxes, giving lawmakers to their left the lead in proposing how to do it. There will be substantial sticker shock from the electorate when they realize how large the necessary tax increases are, and how much of the problem they would still leave unsolved. This dynamic would expand acceptance of the reality that cost constraints will be required.
Eligibility ages. From a pure policy perspective, eligibility age changes bear enormous advantages over tax increases and benefit cuts. Eligibility changes directly address a key driver of the problem: a population that is living longer and thus collecting benefits for a longer period of time. They are also the reforms that best preserve standards of living. Whereas payroll tax increases lower workers’ standards of living, and benefit reductions lower retirees’ standards of living, eligibility age changes enhance them. In fact, it has been shown that even delaying one’s departure from the workforce by a few months [ [link removed] ] does as much for one’s retirement income security as saving an additional 1% of one’s earnings for one’s entire career. The current availability of Social Security retirement benefits at age 62 significantly increases the risk that healthy, productive people depart the workforce prematurely and outlive their savings. Merely raising the earliest eligibility age from 62 back to 65 (where it originally was) would significantly reduce poverty among seniors because it would facilitate their saving more before retiring, while reducing the number of years over which their savings must be stretched.
Eligibility age changes have downsides, too. The politics of eligibility age increases are rendered famously difficult by misunderstandings fostered by confusing nomenclature and widespread disinformation. Changes to the full retirement age (or FRA, now 67) produce systemic savings by reducing benefit amounts paid at a given age, but they do not actually force people to delay retirement. Participants can still choose the claim age that works best for their personal circumstances, such as their health and expected longevity. If, hypothetically, the Early Eligibility Age (or EEA, now 62) were gradually raised from 62 to 65, while the FRA were raised from 67 to 70, everyone would still be able to claim benefits at 65, the age that was set at Social Security’s inception, and those future benefits would also be much higher due to intervening benefit indexing.
This of course wouldn’t stop political opportunists from misleading the public by claiming that such changes would force Americans to work to 70 before claiming benefits. However, these difficult politics can be mitigated. One way is to do away with the nomenclature of EEA and FRA entirely, as suggested by the Bipartisan Policy Center [ [link removed] ]. Instead of the law depicting benefits at age 70 as “full benefits,” the formulas could be redrawn to label only the benefits payable at the earliest claim age. If that is decided to be 65, then 65 could be retitled as the Minimum Benefit Age [ [link removed] ], and no label for age 70 would be necessary. There is no reason for lawmakers to suffer the bad politics of appearing to raise eligibility requirements to 70 when no one would actually be required to wait that long.
Another downside of relying too much on eligibility age changes is that they are slow to generate savings. This is a significant drawback in a situation where most projected cost growth relative to GDP plays out over the next 15 years. Historically, lawmakers have phased in age changes gradually because they don’t want to move the goalposts on those nearing retirement. Even to eliminate one-third of the shortfall, lawmakers would need to raise the FRA by one month every year for the next few decades. So, for all their policy upsides, eligibility age changes can only be part of the solution.
Benefit changes. Benefit changes in many ways act the opposite of tax increases and eligibility age changes, when the dynamic shifts from abstract debate to concrete legislation. The savings from eligibility age changes are sharply limited by how fast lawmakers are willing to phase them in. Tax increases produce also far less of a financial improvement than many have been led to believe. But benefit changes can be incredibly powerful engines of future savings, far greater than many people assume. Although it is reasonable to start out aiming for a balance of one-third eligibility age changes, one-third tax increases and one-third benefit restraints, legislators may well find it more palatable policy to split it as 50% benefit restraints, 25% tax increases and 25% eligibility age changes.
For example, simply re-indexing the growth of the brackets in the Social Security benefit formula, to grow with price inflation rather than wage inflation, would close roughly 40% of the long-term shortfall. Merely correcting the calculation of price inflation [ [link removed] ] by using a more accurate index would close roughly one-sixth of the shortfall by itself. Slowing the rate of benefit accrual for higher-than-average incomes via changes to the numerical benefit formula [ [link removed] ] could close one-quarter of the shortfall or more. Reforming the benefit formula [ [link removed] ] to stop unintended windfalls for sporadic high-income earners could close another 6%. It doesn’t take long before one realizes that common-sense changes to moderate the growth of benefits can generate savings more rapidly—and perhaps even more fairly—than tax or eligibility age changes.
The 2024 Social Security trustees’ report depicts a system in mortal danger. There is still enough time to broker a bipartisan solution that saves Social Security, but it will require a fundamental reversal of direction by the political leadership of both major parties—and sooner rather than later.

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