The Social Security trust fund is actually two Treasury-held accounts that hold roughly $2.72 trillion in government securities, built up over decades when payroll taxes brought in more than benefits cost. According to the 2025 Trustees Report, the combined funds can pay full scheduled benefits through 2034. After that, payroll taxes coming in each month would still cover about 81 percent of scheduled payments.1Social Security Administration. 2025 OASDI Trustees Report Summary So the fund is not “broke,” and benefits do not disappear in 2034. What happens instead depends on whether Congress acts before then.
Two Funds, Not One
Social Security runs through two legally separate accounts at the U.S. Treasury, even though people usually talk about them as a single pot.
The Old-Age and Survivors Insurance (OASI) Trust Fund is the big one. It pays monthly retirement benefits to workers who have earned enough credits, plus benefits to their spouses, children, and the survivors of workers who die.2Social Security Administration. Old-Age and Survivors Insurance Trust Fund This is what most people picture when they hear “Social Security.”
The Disability Insurance (DI) Trust Fund is separate. It pays workers whose medical condition prevents them from working and is expected to last at least a year or result in death. Federal law requires the two accounts to keep separate books. Congress can authorize transfers between them and has done so in the past, but the default is that each fund stands on its own.3Center on Budget and Policy Priorities. Understanding the Social Security Trust Funds
That separation matters because the two funds are in very different shape. More on that below.
Where the Money Comes From
Three revenue streams feed the funds, and payroll taxes dwarf the other two.
Payroll Taxes
Under the Federal Insurance Contributions Act, employees and employers each pay 6.2 percent of wages toward Social Security, for a combined rate of 12.4 percent.4Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates The tax applies only up to an annual earnings cap. For 2026 that cap is $184,500, so wages above that amount are not subject to Social Security payroll tax.5Social Security Administration. Contribution and Benefit Base
Self-employed workers pay the full 12.4 percent themselves under the Self-Employment Contributions Act, though they can deduct the employer-equivalent half when calculating income tax.6Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax
Interest on Trust Fund Holdings
The Treasury pays interest on the securities held by the funds. The effective annual rate across all holdings was 2.6 percent in 2025, while newly issued securities in early 2026 have carried rates around 4.0 to 4.375 percent.7Social Security Administration. Social Security Average and Effective Interest Rates8Social Security Administration. Nominal Interest Rates on Special Issues The portfolio turns over gradually as older bonds mature, so the effective rate lags behind current-issue rates.
Income Tax on Benefits
Higher-income retirees pay federal income tax on part of their benefits, and that revenue flows back into the funds. Taxability turns on “combined income” (adjusted gross income plus tax-exempt interest plus half of your Social Security benefits). Up to 50 percent of benefits become taxable above $25,000 for single filers or $32,000 for joint filers, rising to up to 85 percent above $34,000 single or $44,000 joint.9Internal Revenue Service. Social Security Income10Office of the Law Revision Counsel. 26 USC 86 – Social Security and Tier 1 Railroad Retirement Benefits Congress set these thresholds in 1983 and has never adjusted them for inflation, so a growing share of retirees crosses them each year.11Social Security Administration. Income Taxes on Social Security Benefits
How the Reserves Are Invested
By law, any surplus must be invested in securities backed by the full faith and credit of the United States. In practice, nearly all holdings are “special-issue” Treasury securities available only to the trust funds, not sold on the open market.12Social Security Administration. Frequently Asked Questions About the Social Security Trust Funds
These securities function like a loan from Social Security to the rest of the federal government. Treasury takes the cash for general operations and pays interest back to the funds. When monthly payroll taxes fall short of benefit payments, the Social Security Administration redeems some of these bonds for cash. That is how the reserves get drawn down, and it is exactly what has been happening in recent years as baby boomers retire.
Critics sometimes call these securities “IOUs” to suggest the money has been spent and cannot be recovered. That framing is misleading. The bonds carry the same legal guarantee as any Treasury debt held by foreign governments or private investors. The government has never defaulted on Treasury securities, and doing so would trigger a debt crisis far larger than Social Security.12Social Security Administration. Frequently Asked Questions About the Social Security Trust Funds
What the Projections Actually Say
The 2025 Trustees Report projects the combined OASI and DI funds can pay full scheduled benefits through 2034. After depletion, incoming payroll tax revenue would cover about 81 percent of scheduled benefits, declining to 72 percent by 2099.1Social Security Administration. 2025 OASDI Trustees Report Summary
Looked at separately, the two funds face very different futures:
- OASI (retirement and survivors) reserves are projected to run out in 2033, after which incoming taxes would cover 77 percent of scheduled retirement benefits.13Social Security Administration. 2025 OASDI Trustees Report – Highlights
- DI (disability) is not projected to deplete at any point during the 75-year projection window ending in 2099.1Social Security Administration. 2025 OASDI Trustees Report Summary
The dates shift year to year with wage growth, employment, and immigration levels. The combined depletion date moved one year earlier between the 2024 and 2025 reports (from 2035 to 2034), partly because the Social Security Fairness Act of 2025 repealed two benefit-reduction provisions and increased payouts to more than 3.1 million people.14Social Security Administration. Social Security Fairness Act
What Happens If Reserves Run Out
Benefits do not vanish. Workers keep paying payroll taxes every payday, and that revenue flows directly into benefit checks. The shortfall is the gap between what those taxes bring in and what full scheduled benefits would cost.
The legal picture is trickier. The Social Security Act entitles beneficiaries to their full scheduled amounts, but the Antideficiency Act bars federal agencies from spending more than they have. With no reserves left, the Social Security Administration cannot legally pay benefits that exceed current tax revenue.15Congress.gov. Social Security: What Would Happen If the Trust Funds Ran Out?
Nobody knows exactly how this would play out because it has never happened. The two commonly discussed scenarios are paying full amounts on a delayed schedule or paying reduced amounts on time. Either way, beneficiaries would receive less than they are currently promised.
How Efficiently the Fund Runs
Overhead is low. In 2024, administrative expenses were 0.5 percent of total combined trust fund costs. OASI ran at 0.4 percent; DI, which requires medical eligibility reviews, cost 1.6 percent. Administrative expenses have stayed at or below one percent of combined costs every year since 1989.16Social Security Administration. Social Security Administrative Expenses Nearly every dollar in comes back out as benefits.
Proposed Fixes
Congress has known about the shortfall for decades, and the menu of fixes is well understood. Every serious proposal involves raising revenue, reducing benefits, or both.
Raising Revenue
The most frequently discussed revenue option is raising or eliminating the $184,500 earnings cap so higher earners pay Social Security tax on more of their income. The Congressional Budget Office has analyzed two versions:17Congressional Budget Office. Increase the Maximum Taxable Earnings That Are Subject to Social Security Payroll Taxes
- Raising the cap so 90 percent of covered earnings are taxed would push the combined depletion date out by roughly three years.
- Applying the payroll tax to earnings above $250,000 (in addition to earnings below the current cap) would push it out by roughly 17 years.
Another option is raising the payroll tax rate itself. Splitting a one-percentage-point increase evenly between employers and employees (0.5 points each) would generate significant additional revenue, with the exact solvency impact depending on when the increase takes effect.18Congressional Budget Office. How Changing Social Security Could Affect Beneficiaries and the System’s Finances
Slowing Benefit Growth
On the benefit side, the most commonly modeled options are:
- Raising the full retirement age. It is currently 67 for anyone born in 1960 or later; proposals would gradually raise it to as high as 70, effectively cutting lifetime benefits.
- Switching cost-of-living adjustments from the current CPI-W to the chained CPI, which tends to grow about 0.3 percentage points slower per year.18Congressional Budget Office. How Changing Social Security Could Affect Beneficiaries and the System’s Finances
- Adjusting the progressive benefit formula to reduce payments for higher-income retirees while protecting lower earners.
No single option closes the entire gap. The math only works with a package, and the longer Congress waits, the more abrupt the changes need to be. A fix enacted today could use gradual phase-ins that barely touch current retirees. A fix enacted the year before depletion would hit everyone at once.