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.
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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 2023 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. 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 jumped to 72.878 million people in November of 2024.
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.
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.
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