Solutions to Social Security’s solvency problem fall into two families — raising revenue and slowing benefit growth — and every serious reform package mixes provisions from both, because no single change closes the gap on its own. The combined trust funds are projected to run out of reserves by 2034, at which point incoming payroll taxes would cover only about 81 percent of scheduled benefits.1Social Security Administration. 2025 OASDI Trustees Report The long-term funding gap averages 3.82 percent of taxable payroll over 75 years. What follows is the menu of options currently on the table, what each one actually does, and who pays for it.
The Deadline and What a Do-Nothing Scenario Looks Like
Under current law, Social Security can only pay benefits from its trust funds. Once reserves are gone, the program doesn’t shut down, but it can’t spend more than it takes in. The Old-Age and Survivors Insurance fund, which pays retirement and survivor benefits, is projected to run dry in 2033, at which point ongoing tax revenue would cover roughly 77 percent of scheduled retirement benefits.2Social Security Administration. A Summary of the 2025 Annual Reports Combined with the Disability Insurance fund, the exhaustion date moves to 2034 with 81 percent payable at first, declining to 72 percent by the end of the 75-year window.1Social Security Administration. 2025 OASDI Trustees Report
The gap isn’t abstract. For a retiree collecting $2,000 a month, a 23 percent cut is $460 gone every month, with no phase-in. Congress has never allowed an automatic cut like this to happen, but the closer the deadline gets, the narrower the range of painless options becomes.
Raising or Removing the Payroll Tax Cap
Social Security taxes apply only up to a ceiling on earnings called the contribution and benefit base. In 2026, that cap is $184,500.3Social Security Administration. Contribution and Benefit Base Every dollar above that is exempt from the 12.4 percent payroll tax. The cap adjusts annually based on national average wages.4Office of the Law Revision Counsel. 26 USC 3121 – Definitions
Eliminating the cap entirely is the single most potent revenue-side fix available. Taxing all earnings without granting additional benefit credit for the newly taxed income would close an estimated 67 percent of the 75-year funding gap. If workers earned additional benefits on that income, closure drops to about 48 percent.5Social Security Administration. Provisions Affecting Payroll Taxes
A “donut hole” variation keeps the current cap, leaves a band of income untaxed, and resumes the payroll tax on earnings above a higher threshold like $400,000. Either version concentrates the additional burden on roughly the top 6 percent of earners. About 94 percent of workers earn below the current cap and wouldn’t see any change.
Increasing the Payroll Tax Rate
The current Social Security tax rate is 6.2 percent for employees and 6.2 percent for employers, totaling 12.4 percent on covered earnings.6Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax Self-employed workers pay the full 12.4 percent themselves.7Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax Those rates haven’t changed since 1990.
A gradual increase of 0.1 percentage point per year over a decade would bring the combined rate to 13.4 percent. Because it applies to every covered worker’s earnings, even a small increase generates substantial revenue. The appeal is simplicity and a broad base: everyone contributes a little more, phased in slowly enough that it barely registers in a single paycheck. The tradeoff is that costs rise for employers and workers at the same time. Economic research suggests the employee’s share effectively comes out of wages too, even though it’s labeled as an employer contribution.
Taxing More of Social Security Benefits
Benefits themselves can be subject to federal income tax, and that revenue flows back into the trust funds. The thresholds are set in 26 U.S.C. § 86. If your combined income falls below $25,000 for a single filer or $32,000 for a married couple filing jointly, none of your benefits are taxed. Between those and $34,000 or $44,000, up to 50 percent of benefits are taxable. Above those levels, up to 85 percent becomes taxable.8Office of the Law Revision Counsel. 26 USC 86 – Social Security and Tier 1 Railroad Retirement Benefits
Those dollar figures have never been adjusted for inflation. The $25,000 and $32,000 thresholds were set in 1983; the $34,000 and $44,000 tier was added in 1993. In 1983 dollars, $25,000 is equivalent to roughly $80,000 today. Because the thresholds are frozen, more retirees are pulled into benefit taxation every year, a form of bracket creep that increases trust fund revenue without a vote. Proposals to accelerate this include lowering the thresholds, eliminating the 50-percent tier so all taxable benefits are taxed at 85 percent, or taxing 100 percent of benefits above certain income levels. The amounts raised are modest compared to payroll tax changes.
Covering More Workers
Not everyone pays into Social Security. About a quarter of state and local government employees participate in their own pension systems instead. Legislation in the 1980s and 1990s brought many public workers into the system, but new hires at some agencies still aren’t covered. Requiring all newly hired state and local employees to participate starting in 2026 would close about 4 percent of the long-term actuarial deficit.9Social Security Administration. Long Range Solvency Provisions
Four percent is small, but this provision does more than raise revenue. It expands the risk pool and eliminates coverage gaps that leave some public-sector retirees without Social Security as a safety net. It shows up in bipartisan reform packages because political resistance is lower than for tax increases or benefit cuts. The tradeoff falls on state and local governments, which would need to restructure pension plans and absorb the employer’s share of payroll taxes for new hires.
Investing Trust Fund Reserves in Equities
By law, trust fund reserves must be invested in interest-bearing obligations guaranteed by the United States government, essentially special-issue Treasury bonds. Some proposals would allow a portion of reserves, often capped around 40 percent, to be invested in equities.10Center for Retirement Research. Can Equity Investments Help Social Security’s Finances?
Historical modeling shows equity returns could have grown the fund substantially over decades. The risks are real. Stock markets crash, and a badly timed downturn could accelerate depletion. There are governance concerns about the federal government holding large equity positions in private companies, including potential conflicts of interest and political pressure on investment decisions. Administrative costs would rise. The window for this strategy is also shrinking: with reserves projected to drop toward zero within a decade, there’s less principal left to invest. This approach works as a complement to other reforms, not a standalone fix.
Raising the Full Retirement Age
The full retirement age is the age at which you receive 100 percent of your calculated benefit. Section 216(l) of the Social Security Act sets it based on birth year: 65 for people born before 1938, gradually increasing to 67 for anyone born in 1960 or later.11Social Security Administration. 42 USC 416 – Other Definitions That schedule was created in 1983, and the final step to 67 is already fully phased in.
Most proposals would move the full retirement age to 68, 69, or 70, phased in over decades. Each year added effectively reduces lifetime payouts because you either wait longer or accept a larger reduction for claiming early. Someone born in 1960 or later who claims at 62 already takes a 30 percent permanent reduction.12Social Security Administration. Benefits Planner – Retirement – Born in 1960 or Later If the full retirement age moved to 70, that same early claim at 62 would produce roughly a 45 percent reduction based on the existing actuarial formula.13Social Security Administration. Early or Late Retirement
The argument for this approach is that people live longer than they did in 1935 or 1983. The argument against it is that life expectancy gains haven’t been evenly distributed. Workers in physically demanding jobs and workers with lower incomes tend to have shorter lifespans, so a higher retirement age hits them harder. The same change that looks reasonable in aggregate can function as a steep benefit cut for people who can’t realistically work into their late 60s.
Changing the Benefit Formula
Your monthly check at full retirement age is based on your Primary Insurance Amount, calculated from your highest 35 years of inflation-adjusted earnings. The formula uses income thresholds called “bend points” that determine how much of your earnings history gets replaced.14Social Security Administration. 20 CFR 404.212 – Computing Your Primary Insurance Amount Low earners get a higher replacement rate, and higher earners get progressively less.15Legal Information Institute. 20 CFR Appendix II to Subpart C of Part 404 – Benefit Formulas Used With Average Indexed Monthly Earnings
The most discussed reform, progressive price indexing, works by making the formula more progressive: protecting lower earners while slowing benefit growth at the top. Bend points currently grow with national average wages, which tend to outpace inflation. Progressive price indexing would switch the growth formula for higher earners to price indexing, which tracks general inflation and grows more slowly. Benefits for the lowest earners would still track wages. According to Congressional Budget Office analysis, this change would eliminate most of Social Security’s cumulative 75-year deficit.
The downside is that reductions for middle- and upper-income retirees compound over time. A worker retiring in 2045 would notice a modest difference. A worker retiring in 2075 could see a substantially smaller check than the current formula would promise.
Changing the Cost-of-Living Formula
Once you start collecting benefits, your check gets an annual cost-of-living adjustment tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.16Social Security Administration. Automatic Determinations – Cost-of-Living Adjustment The statutory formula is in Section 215(i) of the Social Security Act.17Social Security Administration. 42 USC 415 – Computation of Primary Insurance Amount Over a long retirement, small annual differences in the index compound heavily.
Chained CPI: Slower Growth, Smaller Checks
One proposal switches to the Chained Consumer Price Index for All Urban Consumers (C-CPI-U). The chained index accounts for consumers substituting cheaper items when prices rise, so it grows about 0.2 to 0.3 percentage points less per year than CPI-W. Over a 25-year retirement, that adds up. A retiree collecting $2,000 a month at age 65 could receive noticeably less per month by age 85 under the chained index. The savings come entirely from beneficiaries, with the longest-lived retirees absorbing the largest cumulative reduction.
CPI-E: Faster Growth, Higher Costs
A competing proposal moves the other way. The experimental Consumer Price Index for the Elderly (R-CPI-E), developed by the Bureau of Labor Statistics, weights spending categories the way people 62 and older actually spend, with a heavier emphasis on health care. From 1985 to 2024, the R-CPI-E grew roughly 211 percent compared to 188 percent for CPI-W. Adopting CPI-E would produce larger annual COLAs but accelerate trust fund depletion by an estimated three to five years.18Social Security Administration. Social Security Cost-of-Living Adjustments and the Consumer Price Index It’s typically proposed alongside revenue increases that would offset the added cost.
Means-Testing Benefits
Means-testing would reduce or eliminate benefits for retirees whose income or assets exceed certain thresholds. Various proposals suggest phasing out benefits starting at income levels ranging from $40,000 to $120,000, with reductions reaching 50 to 85 percent for the highest earners.
The concept is more complicated than it sounds. Social Security has always operated as social insurance rather than welfare: you pay in, and you get benefits based on your earnings history. Introducing an income or asset test changes that relationship and could erode political support among higher-income workers who might see less reason to defend a program they’d be excluded from. Income fluctuates year to year, asset valuations are complex, and administrative costs rise when the system has to verify each beneficiary’s finances annually. Means-testing tends to save less than people expect, because relatively few retirees have income high enough to trigger meaningful reductions, and the administrative machinery eats into whatever savings materialize.
Why Combinations Are the Realistic Path
No single proposal closes the entire 3.82-percent-of-payroll funding gap on its own. Even eliminating the payroll tax cap, the most powerful single lever, covers only about two-thirds of the shortfall at best.5Social Security Administration. Provisions Affecting Payroll Taxes Realistic packages combine several provisions: some revenue increase, some benefit adjustment, and structural changes like expanded coverage. The Social Security Administration’s Office of the Chief Actuary publishes scored estimates for dozens of individual provisions, showing exactly what fraction of the gap each one closes.9Social Security Administration. Long Range Solvency Provisions
The longer Congress waits, the steeper any eventual fix becomes. A reform enacted today can use small, gradual adjustments phased in over decades. A reform enacted in 2033, after the OASI fund is already depleted, would require immediate, sharper changes to close the same gap. Every year of delay narrows the menu of options that feel manageable to workers and retirees.