Contents

• Introduction
• The Social Security Trust Funds
• Why Use Trust Funds?
• Social Security Trust Funds and Investment
• Social Security Trust Funds and Off-Budget Status
• Social Security Trust Funds and the Level of Federal Debt
• Program Financing
• Sources of Income
• Payroll Taxes
• Taxation of Benefits
• Interest Income
• Total Revenues
• Sources of Cost
• Monthly Benefits
• Administrative Costs
• Railroad Retirement Board Interchange
• Total Costs
• Surpluses, Deficits, and Balances
• Cash Flow Balances
• Annual Balances
• Asset Reserves Held in the Trust Funds
• Historical Combined Trust Fund Operations
• Projected Shortfall
• What Caused the Projected Shortfall?
• Scheduled Versus Payable Benefits
• What Is the Magnitude of the Shortfall?
• What Happens to Benefits in the Case of Insolvency?
• Possible Scenario #1: Full Delayed Payments
• Possible Scenario #2: Reduced On-Time Payments
• What Can Congress Do?

Summary

The Social Security program pays monthly cash benefits to retired or disabled workers and their family members and to the family members of deceased workers. Social Security's receipts and expenditures are accounted for through two federal trust funds: the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and the Federal Disability Insurance (DI) Trust Fund. The trust funds represent funds dedicated to pay current and future Social Security benefits.

The OASI and DI programs each have three sources of income: payroll tax revenues, federal income taxes paid by some beneficiaries on a portion of their benefits, and interest income from the investment of asset reserves in U.S. government securities. Payroll tax revenues provide about 90% of program income, federal income taxes on Social Security benefits provide about 5% of program income, and interest provides about 5% of program income. By law, Social Security tax revenues must be invested in U.S. government obligations (debt instruments of the U.S. government). The OASI and DI programs each have three sources of cost: monthly benefits, administrative costs, and costs associated with the Railroad Retirement Board interchange. Monthly benefits typically account for over 99% of program costs. The interactions between these revenues, costs, and trust fund balances (i.e., accumulated excess revenues from previous years) determine each program's ability to pay full scheduled benefits on time.

According to the 2026 annual report of the Social Security Board of Trustees, the OASI trust fund has been operating under an annual deficit—total costs exceeding total revenues—since 2021. Furthermore, the Social Security trustees project this financial shortfall to continue indefinitely. Specifically, the trustees show that while OASI's total revenues are increasing, the program's total costs are increasing more rapidly. This trend can exist, with the OASI program able to pay full benefits, only so long as a positive trust fund balance exists to cover the shortfall.

Under their intermediate assumptions and current law, the Social Security trustees project that the OASI trust fund will become depleted (i.e., insolvent) in 2032, whereas the DI trust fund will not become depleted in the 75-year projection period. The two trust funds are legally distinct and do not have authority to borrow from each other. However, Congress has authorized the shifting of funds between OASI and DI in the past to address shortfalls in a particular fund. For this reason, and because of the projected insolvency of the OASI trust fund, the two trust funds are often considered on a combined (i.e., OASDI) basis. The trustees project that the combined Social Security trust funds would become depleted in 2034. At the point of trust fund depletion, a program's (e.g., OASI's) incoming revenue would be sufficient to pay only a fraction of the benefits scheduled to be paid under current law. Trust fund insolvency does not mean that Social Security will be unable to pay any benefits.

If a trust fund were to be depleted and current receipts were insufficient to cover current expenditures, there would be a conflict between two federal laws. Under the Social Security Act, beneficiaries would still be legally entitled to their full scheduled benefits. However, the Antideficiency Act prohibits government spending in excess of available funds, so the Social Security Administration (SSA) would not have legal authority to pay full Social Security benefits on time.

The Social Security Act does not stipulate what happens to benefit payments if a trust fund becomes depleted. Thus, it is unclear what specific actions SSA would take if a trust fund were insolvent. After depletion, a trust fund would continue to receive tax revenues from which a portion of scheduled benefits could be paid. One option would be to pay full benefits on a delayed schedule; another would be to make timely but reduced payments.

Eliminating OASI's financial shortfall would require reductions in Social Security benefits, increases in tax revenues, or some combination of the two. The sooner that Social Security policy changes are undertaken, the less abrupt the changes would need to be, because they could be spread over a longer period and would therefore affect a larger number of workers and beneficiaries. Enacting adjustments to Social Security policy sooner, rather than later, would give workers and beneficiaries more time to plan and adjust their work and savings behavior.

Introduction

Known collectively as Social Security, the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) programs provide monthly cash benefits to eligible retired or disabled workers and their dependents, and to the eligible survivors of deceased insured workers.¹ The programs, referred to on a combined basis as OASDI, are authorized under Title II of the Social Security Act and are administered by the Social Security Administration (SSA).²

Workers obtain insurance by working for a sufficient number of years in jobs covered by Social Security. A worker's job is considered covered if the earnings derived from that job are subject to the Social Security payroll tax and are thus creditable for program purposes. In 2026, an estimated 185 million people (or about 94% of all workers) will work in paid employment or self-employment covered by Social Security.³ In August 2026, more than 71 million people collected Social Security benefits.⁴ Approximately 77% of those beneficiaries are retired workers, and another 10% of those beneficiaries are disabled workers.

Monthly Social Security benefits are based on a retired or disabled worker's career-average earnings in jobs covered by Social Security. The monthly benefits are designed to replace a portion of the income lost to a family due to the retirement, disability, or death of the worker. In August 2026, the average monthly benefit for retired workers was $2,088, whereas the average monthly benefit for disabled workers was $1,636.⁵ Family members of retired, disabled, or deceased workers accounted for the remainder of the benefit population (about 13%) and collected an average monthly benefit of $1,325.

Social Security's receipts and expenditures are accounted for through two federal trust funds: the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and the Federal Disability Insurance (DI) Trust Fund. The trust funds represent funds dedicated to pay current and future Social Security benefits. The OASI and DI programs' ability to pay the full amount of scheduled monthly benefits depends on the relationship between the revenues, costs, and asset reserves held in the respective trust fund.

Each year when the Social Security trustees release their annual report, attention is focused on the projected year in which the Social Security trust funds will become depleted (i.e., the year in which the amount of asset reserves falls to zero). In their 2026 report, the trustees project that the OASI trust fund will become depleted in 2032, whereas the DI trust fund is not projected to become depleted at any time in the next 75 years.⁶ The trustees project, on a hypothetical combined basis, that the OASDI trust fund would be depleted sometime in 2034. These projections, and the projections presented in this report, are based on the trustees' intermediate assumptions, which reflect their best understanding of the status of the Social Security trust funds at the start of 2026.⁷ These projected depletion dates indicate a financial shortfall that, absent a change to current law, would compromise the program's ability to pay full scheduled benefits.

Social Security is the federal government's largest benefit program. Moreover, among aged individuals, Social Security is the most common source of income (90% of aged individuals receive Social Security benefits) and also the largest source of income (Social Security supports over one-quarter of aggregate income for aged individuals).⁸ Some people mistakenly believe that if the trust funds were depleted, Social Security would be unable to pay benefits at all. However, in 2032, the first year of the projected depletion of the OASI trust fund, ongoing revenues are expected to pay approximately 78% of scheduled benefits.⁹

To examine the Social Security trust funds and the projected financial shortfall, this report (1) discusses what the Social Security trust funds are and how they are used; (2) defines Social Security's sources of income and cost, and analyzes their respective performance (cash flow and annual balances); (3) discusses the effects of these balances on trust fund asset reserves and the ability of each program to pay full benefits; and (4) focuses on what would happen if a trust fund were to be depleted.

The Social Security Trust Funds

Within the U.S. Treasury, numerous accounts are in place for internal accounting purposes. Although all the monies within the U.S. Treasury are federal monies, the designation of an account as a trust fund allows the government to track revenues dedicated for specific purposes (as well as expenditures). In addition, the government can affect the level of revenues and expenditures associated with a trust fund through changes in the law.

Social Security program revenues (i.e., income or receipts) and costs (i.e., outgo or expenditures) are accounted for in two separate trust funds authorized under Title II of the Social Security Act: (1) the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and (2) the Federal Disability Insurance (DI) Trust Fund.¹⁰ The OASI trust fund was created by the Social Security Act Amendments of 1939 (P.L. 76-379) and superseded the Old-Age Reserve Account established by the original Social Security Act in 1935 (P.L. 74-271).¹¹ The DI trust fund was established as part of the Social Security Amendments of 1956 (P.L. 84-880).¹² The trust funds have existed on a hypothetical combined basis since the DI fund was first credited with receipts and debited for expenditures in 1957.

In the federal accounting structure, a trust fund is an accounting mechanism used by the Department of the Treasury to track and report receipts dedicated for spending on specific purposes, as well as expenditures made to beneficiaries that are financed by those receipts, in accordance with the terms of a statute that designates the fund as a trust fund.¹³ The OASI trust fund records receipts and expenditures associated with retired workers, their dependents, and survivors of deceased insured workers. The DI trust fund records receipts and expenditures associated with disabled workers and their dependents. Under current law, the two trust funds are legally distinct and do not have authority to borrow from each other. However, several times in the past, lawmakers have authorized the reallocation of the Social Security payroll tax rate and have authorized interfund borrowing to preserve the solvency of the two trust funds.¹⁴ This precedent is important given projections showing that the asset reserves held by the OASI fund will be depleted in 2032, whereas the asset reserves held by the DI fund are not projected to be depleted at any time during the next 75-year period.¹⁵ Because of the prior authorization to shift funds between OASI and DI, analysts often treat the two funds collectively on a hypothetical basis as the combined OASDI trust funds.

A government trust fund has different attributes than private sector trust funds. The Government Accountability Office (GAO) notes the following:

In the federal budget the meaning of the term "trust" differs significantly from its private sector usage. In the private sector, a person creates a private trust fund using his or her own assets to benefit a stated individual(s). The creator of the trust names a trustee who has a fiduciary responsibility to manage the designated assets in accordance with the stipulations of the trust. In the federal sector, the Congress creates a federal trust fund in law and designates a funding source to benefit stated groups or individuals. However, in contrast to a private trust fund, the federal government does not have a fiduciary responsibility to the trust beneficiaries, and it can raise or lower future trust fund collections and payments or change the purposes for which the collections are used by changing existing laws. Moreover, the federal government has custody and control of the funds as well as the earnings of most federal trust funds.¹⁶

Why Use Trust Funds?

As opposed to the General Fund, which finances the daily and long-term operations of the federal government as a whole, a trust fund—such as the two Social Security trust funds—is required to be available for a specific program or use.¹⁷ Under current law, monies held in the Social Security trust funds may be spent only on program costs. In the case of Social Security, costs are largely synonymous with benefit payments. It is argued that the decision to tie a program to a trust fund signals a long-term political commitment: "The trust fund device is meant to provide assurance that policy promises, once made, will be kept."¹⁸ Upon creation of the OASI trust fund, President Franklin D. Roosevelt remarked, "We put those pay roll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program."¹⁹

Although usage of the trust fund mechanism may reflect a political commitment, it does not represent a legally binding one. While Social Security has been referred to as an intergenerational compact—between workers of one generation and beneficiaries from another—it has also been argued that "a trust fund is only as secure as its beneficiaries are powerful."²⁰ Congress has the right to change the compact at any point by altering the tax revenue supplied by workers or the benefits collected by beneficiaries.

Social Security Trust Funds and Investment

The Secretary of the Treasury is required by law to invest Social Security revenues in securities backed by the U.S. government (i.e., special U.S. government obligations).²¹ These securities are held in the Social Security trust funds, and the trust funds receive interest on these holdings. Each U.S. government security issued by the U.S. Treasury for purchase by the Social Security trust funds must be a paper instrument in the form of a bond, note, or certificate of indebtedness.²²

Any interest or proceeds from the sale of U.S. government securities held by the Social Security trust funds must be paid in the form of paper checks from the General Fund of the Treasury to the Social Security trust funds.²³ The interest rates paid on the securities issued to the Social Security trust funds are tied to market rates. Specifically, for any newly-issued security, the average yield is calculated as the average market yield on any marketable interest-bearing security of the federal government that is not due or callable until after four years from the last business day of the prior month, rounded to the nearest eighth of one percent.²⁴

For internal federal accounting purposes, when special U.S. government obligations are purchased by the Social Security trust funds, the U.S. Treasury is shifting surplus Social Security revenues from one government account (the Social Security trust funds) to another government account (the General Fund). The special U.S. government obligations are physical documents held by SSA, not the U.S. Treasury. The securities held by the Social Security trust funds are redeemed on a regular basis. These special U.S. government obligations, however, are not resources for the federal government because they represent both an asset and a liability for the government.²⁵

Social Security Trust Funds and Off-Budget Status

For federal budget purposes, on-budget status generally refers to programs that are included in the annual congressional budget process, whereas off-budget status generally refers to programs that are not included in the annual congressional budget process.

Social Security's receipts and most of its outlays are designated by law as off-budget. The off-budget designation has no practical effect on program funding, spending, or operations. The annual congressional budget resolution, in its legislative language, separates the off-budget totals from the on-budget totals. The report language accompanying the congressional budget resolution usually shows the unified budget totals (which combine the on- and off-budget amounts) as well as the separate on- and off-budget totals. The President's budget tends to use the unified budget measures when referring to the budget totals. The President's budget documents also include the totals for the on- and off-budget components, as required by law. The Congressional Budget Office uses the unified budget numbers in its analyses of the budget; it generally does not include on- and off-budget data in its regular annual reports.

The unified budget framework is important because it includes all federal receipts and outlays, providing a more comprehensive picture of the size of the federal government and the federal budget's impact on the economy. In the unified budget, the Social Security program is a large source of both federal receipts and federal outlays.²⁶ For purposes of the unified budget, the annual Social Security cash flow surplus or deficit is counted in determining the overall federal budget surplus or deficit.²⁷

Social Security Trust Funds and the Level of Federal Debt

As part of the annual congressional budget process, the level of federal debt (the federal debt limit) is established for the budget by Congress. The federal debt limit includes debt held by the public, as well as the internal debt of the U.S. government (i.e., debt held by government accounts). Borrowing from the public and the investment of the Social Security trust funds in special U.S. government obligations both fall under the restrictions of the federal debt limit. As a result, the balance of the Social Security trust funds has implications for the federal debt limit.²⁸

Program Financing

Social Security program financing determines the program's ability to pay benefits to current and future beneficiaries. Revenues for the OASI and DI programs are credited to their respective trust funds, whereas costs for the OASI and DI programs are debited from their respective trust funds.

Sources of Income

Social Security has three sources of income or revenue: (1) payroll tax revenues, (2) tax revenues from the taxation of benefits, and (3) interest earned on asset reserves held in the trust funds. Taken together, payroll tax revenues and tax revenues from the taxation of benefits are referred to more generally as tax revenues or non-interest income. Interest earned on asset reserves held in the trust funds is commonly referred to as interest income.

Payroll Taxes

Payroll taxes provided under the Federal Insurance Contributions Act (FICA) and Self-Employment Contribution Act (SECA) are the primary source of financing for both the OASI and DI programs.²⁹ FICA taxes are paid by both employers and employees, but it is employers who remit the taxes to the U.S. Treasury. Employers remit FICA taxes on a regular basis throughout the year (e.g., weekly, monthly, quarterly, or annually), depending on the employer's level of total employment taxes (including FICA and federal personal income tax withholding). For past FICA and SECA tax rates, see Table A-1.

Under current law, the FICA tax rate is 7.65% of covered earnings for each employees and employers (i.e., each party pays 7.65%, yielding a combined 15.3% payroll tax).³⁰ The FICA tax has two components: 6.2% of covered earnings for Social Security and 1.45% of covered earnings for Medicare Hospital Insurance (HI).³¹ The SECA tax rate is 15.3% of covered earnings for self-employed individuals, with 12.4% of covered earnings for Social Security and 2.9% of covered earnings for Medicare HI.³²

The Social Security portions of FICA and SECA taxes are split between the two Social Security trust funds. FICA taxes are divided, with both employees and employers paying 5.3% of covered earnings to the OASI trust fund (i.e., combined 10.6%) and 0.9% of covered earnings to the DI trust fund (i.e., combined 1.8%). SECA taxes are also divided, with self-employed individuals paying 10.6% of covered earnings to the OASI trust fund and 1.8% of covered earnings to the DI trust fund.³³

The Social Security portions of FICA and SECA taxes are applied to covered earnings up to an annual limit. The annual limit, known formally as the contribution and benefit base (CBB), is indexed to national average wages and is only adjusted in years for which a cost-of-living adjustment is payable.³⁴ Consequently, the CBB generally increases each year.³⁵ While the CBB can remain the same as the previous year, it is protected from decreasing.³⁶ Table A-2 provides a historical record of CBBs.

In aggregate nominal dollars, revenues from payroll taxes have generally increased each year and are projected to increase in each future year³⁷—a result of, among other things, a generally increasing number of workers, generally increasing wages, and a generally increasing CBB (i.e., taxable maximum).³⁸ Table 1 shows the previous five years of payroll tax revenues for each trust fund and the combined trust fund, as well as the projected payroll tax revenues for each under the trustees' intermediate assumptions for the next five years.

Taxation of Benefits

The second type of tax revenue credited to the Social Security trust funds is revenue from the taxation of benefits.³⁹ Beginning in 1984, up to 50% of Social Security benefits became subject to federal income tax for beneficiaries whose provisional income exceeds $25,000 and couples whose provisional income exceeds $32,000.⁴⁰ The proceeds from taxing up to 50% of Social Security benefits are credited to the trust funds. Beginning in 1994, up to 85% of Social Security benefits became taxable if provisional income exceeds $34,000 for single-filing beneficiaries and $44,000 for couples. Proceeds from taxes on the first 50% of Social Security benefits are credited to the trust fund (e.g., OASI or DI) from which they were paid. Proceeds from taxes on Social Security benefits that exceed 50% are credited to the Medicare HI trust fund, regardless of whether benefits were paid from the OASI or DI trust funds.⁴¹

The two sets of thresholds mentioned above are fixed in law. That is, unlike the CBB (i.e., taxable maximum), they are not indexed. Because the thresholds are fixed, the share of Social Security beneficiaries subject to income taxation of a portion of their Social Security benefits is expected to increase as overall economy-wide wages and monthly benefit amounts increase.⁴² Recent projections suggest that more than half of Social Security beneficiaries will be subject to federal income taxes on a portion of their Social Security benefits each year between now and 2050.⁴³

Table 2 shows the previous five years of revenues from the taxation of Social Security benefits for the two Social Security trust funds, and the combined trust funds, as well as the projected revenues from the taxation of Social Security benefits for each under the trustees' intermediate assumptions for the next five years. In aggregate nominal dollars, revenues from the taxation of benefits have generally increased each year and are projected to increase in each future year.⁴⁴ This increase results from, among other things, a generally increasing number of beneficiaries and generally increasing average benefits.⁴⁵

Interest Income

Under current law, asset reserves held in the Social Security trust funds are invested in nonmarketable federal public debt obligations known as special issues.⁴⁶ These securities—like other federal debt obligations—are interest-bearing and, thus, provide a source of income to the Social Security program. The amount of interest income earned for the trust funds depends on the trust fund having a positive balance (i.e., the trust fund must have asset reserves upon which interest is earned) and the interest, or coupon, rate.⁴⁷ For a list of historical interest rates, see Table A-3.

On a combined OASDI basis, revenues from interest income have generally decreased in recent years and are projected to decrease in each future year, in aggregate nominal dollars. ⁴⁸ This decrease results from, among other things, a decreasing amount of excess reserves held in the trust funds.⁴⁹ On an individual fund basis, this holds true for the OASI trust fund but not the DI trust fund (as discussed above, the DI trust fund is not projected to become depleted at any time in the next 75 years). Table 1 shows the previous five years of interest income for each trust fund, and the combined trust funds, as well as the projected interest income for each under the trustees' intermediate assumptions for the next five years.

Total Revenues

Table 4 shows the previous five years of total revenues for each trust fund, and the combined trust funds, as well as the projected total revenues for each under the trustees' intermediate assumptions for the next five years. As shown in the table, total trust fund revenues have grown and are projected to continue to grow on an individual and combined basis. This is largely due to growth in payroll taxes (the largest source of revenue for each trust fund).

Sources of Cost

Social Security has three sources of cost: (1) monthly benefits, (2) administrative costs, and (3) costs associated with the Railroad Retirement Board (RRB) interchange. On a combined basis, monthly benefits typically account for over 99% of program costs.⁵⁰ Conversely, when taken together, administrative costs and transfers required for the RRB interchange account for less than 1% of program costs.

Monthly Benefits

The Social Security program pays benefits on a monthly schedule to all program beneficiaries. Retirement benefits and survivors benefits are paid out (i.e., debited) from the OASI trust fund; disability benefits are paid out (i.e., debited) from the DI trust fund.

In aggregate nominal dollars, the amount paid in monthly benefits has increased in every year of the program's history.⁵¹ The total amount of monthly benefits can be thought of as the product of average benefits and the number of beneficiaries, both of which are projected to increase in future years. (Figure A-1 and Figure A-2 show the intermediate projections for the number of beneficiaries and initial monthly benefits by earnings level.) As such, the total amount of scheduled benefits (i.e., benefits calculated under current law) are projected to increase as well.

Administrative Costs

Expenses incurred by SSA and the Department of the Treasury in administering the OASI and DI programs and associated provisions of the Internal Revenue Code are debited from their respective trust funds.⁵² Nearly all of SSA's administrative expenses are funded by appropriations to its limitation on administrative expenses account, and almost all of the funding for this account is provided each year as part of the annual appropriations process.⁵³

Railroad Retirement Board Interchange

To ensure the OASI and DI trust funds maintain the same financial position in which they would have been if railroad employees had always been covered by Social Security, the Railroad Retirement Act requires an annual financial interchange between the OASI and DI programs with the Railroad Retirement program.⁵⁴

Total Costs

Table 8 shows the previous five years of total costs for each trust fund and the combined trust funds, as well as the projected total costs for each under the trustees' intermediate assumptions for the next five years. As shown in the table, total trust fund costs have grown, and are projected to continue to grow, on an individual and combined basis. As the largest individual source of costs, growth in total costs is attributable to the growth in scheduled benefits.

Surpluses, Deficits, and Balances

Comparing OASI and DI revenues and costs helps to illustrate the financial position of each program. The differences between costs and revenues can be analyzed on a cash flow basis (i.e., noninterest revenues less cost) and on an annual basis (i.e., total revenues less cost). When either measure results in a positive balance, the program operates under a surplus according to that measure. When either measure results in a negative balance, the program operates under a deficit.

Cash Flow Balances

Cash flow balances show the difference between the OASI and DI programs' current revenues and current costs. This measure does not consider interest income earned on asset reserves held in the respective trust funds, as these are generally earned based on accumulated excess revenues from prior years. When noninterest income (i.e., tax revenues) exceeds total cost, the program has a cash flow surplus. When noninterest income (i.e., tax revenues) is less than total costs, the program has a cash flow deficit. If either program operates a cash flow deficit, it may use interest income or accumulated holdings in its trust fund to help cover costs. Table 9 shows that the OASI program has operated cash flow deficits (i.e., negative cash flow balances) for the past five years and is projected to do so for the next five years. Under the intermediate assumptions, the trustees project the OASI program will experience cash flow deficits indefinitely.⁵⁵ Conversely, the DI program has operated cash flow surpluses in each of the past five years, a trend that is expected to continue in the next five years (as shown in Table 9) and in each of the next 75 years.⁵⁶ On a hypothetical OASDI basis, the combined trust funds are projected to experience cash flow deficits in each of the next 75 years.⁵⁷

Annual Balances

The occurrence of cash flow deficits—total costs exceeding noninterest revenues (i.e., tax revenues)—does not necessarily indicate an inability of a trust fund to pay full scheduled benefits (i.e., remain solvent).

In fact, in a perfectly pay-as-you-go (PAYGO) financing approach, with the assets in the trust fund maintained consistently at the level of a "contingency reserve" targeted at one year's cost for the program, the program might well be in a position of having negative cash flow on a permanent basis. This would occur when the interest rate on the trust fund assets is greater than the rate of growth in program cost. In this case, interest on the trust fund assets would be more than enough to grow the assets as fast as program cost, leaving some of the interest available to augment current tax revenue to meet current cost.⁵⁸

If a trust fund's total revenues (i.e., noninterest income plus interest income) were to exceed total cost, the program would be operating an annual surplus. On one hand, a program could operate simultaneous cash flow deficits and annual surpluses, wherein the cash flow deficits were offset by interest income, allowing for full scheduled benefits to be paid.

On the other hand, the ability of a trust fund to pay full benefits could be weakened by sustained annual deficits where total revenues (i.e., noninterest income plus interest income) are less than total cost. A trust fund experiencing sustained cash flow deficits large enough to result in declining trust fund reserves would eventually threaten a program's ability to remain solvent. That is, a trust fund cannot sustain continued cash flow deficits and annual deficits.

Table 10 shows the annual balances for the OASI, DI, and combined trust funds for the previous five years and the next five years under the intermediate assumptions. As shown in Table 10, the OASI program has had annual deficits—interest income was not enough to offset negative cash flows—for the past five years and is projected to have annual deficits for the next five-years. This is projected to continue in each of the next 75 years as well.⁵⁹ Although the DI program has had, and is projected to continue to have, annual surpluses, the status of the combined OASDI trust fund is expected to mimic that of the OASI program.

Asset Reserves Held in the Trust Funds

When a trust fund spends more than it receives in tax revenue and interest income, as it would under an annual deficit, it can redeem accumulated assets to pay scheduled benefits. Essentially, an annual deficit can be offset by drawing from accumulated assets (i.e., excess revenues accrued during years of annual surpluses). This process—redeeming assets reserves (i.e., bonds) held in the trust funds—results in a decrease in trust fund balances and can only occur when a positive trust fund balance exists.

Table 11 shows the trust fund balances for the OASI, DI, and combined trust funds for the previous five years and for the next five years under the intermediate assumptions. As shown in Table 11, the OASI program's annual deficits resulted in decreasing trust fund balances for the 2021 through 2025 period and are projected to continue for the next five years. Moreover, because costs are projected to grow faster than revenues, the trustees estimate that the continuing annual deficits will require increasing amounts of asset reserve redemption leading to asset reserve depletion in 2032. The combined trust funds' experience will closely resemble that of the OASI trust fund; the trustees estimate that on a combined basis, the OASDI trust funds assets would be depleted sometime in 2034. This combined result, an extension of overall program solvency by about two years, relies on the annual surpluses and a growing trust fund balance of the DI trust fund. As previously discussed, any transfer or borrowing from one trust fund to another would require a change in law.

Historical Combined Trust Fund Operations

The trust funds have run annual surpluses in most years. Except for the first decades of the program and a few years beginning in the late 1960s, these annual surpluses were typically small relative to the size of the trust funds' expenditures. Beginning in 1975, the combined trust funds ran annual deficits. The trust funds made up the difference between revenues and cost during these years by redeeming some of the bonds accumulated in earlier years.

The Social Security program experienced significant financial difficulties during the mid-1970s through the early 1980s. A combination of high inflation, high unemployment, and slow real wage growth during this period caused the program's costs to exceed its income, which eroded the balances of the Social Security trust funds. To address these challenges, Congress passed a series of legislative measures aimed at mitigating program costs and increasing revenues.⁶⁰

The Social Security Amendments of 1983 (P.L. 98-21) are commonly considered the most recent major reform to Social Security.⁶⁵ When the amendments were passed, Social Security was months away from being unable to pay full benefits. Among other provisions, the amendments used a combination of revenue-increasing and cost-reducing measures to improve the program's long-range financial status. As a result, from 1983 through 2009, Social Security operated with a cash flow surplus (i.e., tax revenues exceeded costs).⁶⁶ Each of those year's cash surpluses accumulated in the trust funds and were invested in government securities—as required by law—earning interest and contributing to a growing level of asset reserves held in the trust funds (see Figure 1).⁶⁷

The 1983 legislation was seen as solving the short-term and medium-term financing issues that had pressured Social Security for the prior 10-year period. After the 1983 legislation, the program's projected revenues and costs were relatively close over the immediate 75-year projection period (1983-2058). However, in the ensuing years, the program moved farther out of actuarial balance. The Committee on Ways and Means' 2004 Green Book summarized this transition:

The longer range picture for Social Security has been worsening gradually since 1983…. In fact, projections made then showed that Congress had stemmed the red ink, at least on average, for the following 75 years. However, the average condition of the two trust funds did not represent their condition over the entire period. The funds were not shown to be insolvent at any point, but their expenditures were expected to exceed their income by 2025 and to remain higher thereafter. Simply [s]tated, 40 years of surpluses were to be followed by an indefinite period of deficits. With each passing year since 1983, the Trustees' 75-year averaging period has picked up 1 deficit year at the back end and dropped a surplus year from the front end. This, by itself, would cause the average condition to worsen. However in recent reports, assumptions about birth rates, economic growth, and wages have been lowered, causing further deterioration in the long-term outlook.⁶⁸

Since 2010, the Social Security program has operated with cash flow deficits (i.e., costs exceeded tax revenues).⁶⁹ Thus, starting in 2010 the program has relied in part on interest income to pay the full amounts of scheduled benefits. For a time, the asset reserves continued to increase but at a slower pace (see Figure 1). Under the intermediate assumptions, the trustees project cash flow deficits for the remainder of the 75-year projection period.

Starting in 2021, the Social Security program has been operating annual deficits (i.e., total costs exceeded total revenues). Tax revenues and interest together have not covered the amount of scheduled benefits. Thus, since 2021, Social Security has redeemed a portion of the asset reserves held in the trust funds to pay the full amounts of scheduled benefits. Under the intermediate assumptions, the trustees project continuing and generally increasing annual deficits, which will require redeeming increasing amounts of asset reserves (see Figure 1).⁷¹ The program is projected to be able to rely on asset reserves to help pay scheduled benefits on a combined basis until sometime in 2034 (2032 for OASI). At that point, with no trust fund assets to redeem, Social Security would be able to pay out in benefits only what it receives in tax revenues (i.e., noninterest income).

Figure 1. Combined Social Security Trust Fund Asset Reserves, in Billions of Current Dollars 1980-2050 Under Intermediate, Low-cost, and High-cost Assumptions

Source: Congressional Research Service (CRS) and the supplemental single-year tables (Table VI.G2) for the 2026 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, June 8, 2026, Table VI.G2, https://www.ssa.gov/OACT/TR/2026/tr2026.pdf. Notes: Projections use the trustees' 2026 projections. The low-cost set of assumptions represents a future experience (e.g., higher fertility, higher mortality, lower unemployment) that is the most advantageous to the program's financial status. The high-cost set of assumptions represents a future experience (e.g., lower fertility, lower mortality, higher unemployment) that is the least advantageous to the program's financial status. The trustees use the intermediate set of assumptions to illustrate their best guess as to the future experience. Cash surpluses (deficits) denote years in which tax revenues exceed cost (cost exceeds tax revenues). Annual surpluses (deficits) denote years in which total revenues exceed cost (cost exceeds total revenue).

Projected Shortfall

As mentioned above, the projected shortfall—an inability at some point of a program to fulfill scheduled benefit payments—has been expected as the "valuation period moves forward and near-term years of surplus are replaced by distant years of deficit."⁷² A financial shortfall within the 75-year period has been projected in each annual report since 1984.⁷³

What Caused the Projected Shortfall?

The projected shortfall is caused by demographic factors (e.g., fertility, mortality, and immigration), economic factors (e.g., wage growth, price growth, and productivity), and program-specific factors (e.g., automatically adjusted parameters). Considered together, projections of these factors predict a continued trend of program costs growing faster than program revenues.

Projected demographic, economic, and program-specific factors affect all aspects of the future financial status of the program, such as the number of covered workers and their levels of earnings, as well as the size and makeup of the beneficiary population and the level of monthly benefits. Assumptions for all three categories of factors contribute to the projected imbalance. For instance, economic factors—such as recessions—could lead to lower-than-expected payroll tax revenues and higher-than-expected costs.

According to the trustees, the growing difference between costs and revenues is largely attributable to demographic factors. Demographic factors alone are expected to cause the costs to increase markedly in coming years. The trustees write, "Under the intermediate assumptions, demographic factors cause the projected cost rate to rise rapidly until about 2085."⁷⁴ Specifically, the U.S. population has been experiencing a shift in age structure toward older ages and an increase in the median age, termed demographic aging. Two demographic effects have contributed to this aging over time: decreasing fertility and increasing longevity. The Social Security population's changing age distribution is creating a situation in which fewer workers in covered employment are supporting a growing number of people collecting benefits (see Table A-3).⁷⁵ This relationship is temporarily sustainable, as the OASI program can draw upon the $2.1 trillion in asset reserves (i.e., the trust fund balance at the beginning of 2026) held in the trust funds to augment program revenues and fulfill all scheduled benefit payments. However, the OASI program's ability to pay 100% of scheduled benefits becomes unsustainable when these asset reserves are depleted.

Scheduled Versus Payable Benefits

As discussed above, Social Security's ability to pay the full amounts of scheduled benefits to current and future beneficiaries is determined by its revenues, costs, and trust funds. At the point of asset reserve depletion, there would be a difference between scheduled benefits (i.e., benefit amounts specified under current law) and payable benefits (i.e., the percentage of scheduled benefits supported by continuing revenue). Figure 2 shows that, prior to trust fund depletion, scheduled benefits will equal payable benefits. However, at the time of depletion (projected to be 2032 for the OASI program) and absent any changes to current law, total payable benefits will become equal to continuing tax revenues. Payable OASI benefits are projected to be about 78% of scheduled benefits in 2032, gradually decreasing to 60% in the 2080s.

If the trust funds were to combine, then the OASDI program is projected to be able to pay full scheduled benefits until sometime in 2034, after which payable benefits for the OASI and DI program would be about 83% of scheduled benefits, an amount that would gradually decrease to 64% in the 2080s.

Figure 2. Projected Payable Benefits for the Old-Age and Survivors Insurance (OASI), Disability Insurance (DI), and Combined OASDI Trust Funds As a percentage of scheduled benefits (2026-2100)

Source: Congressional Research Service, based on memo from Kyle Burkhalter, Actuary, and Zhongde Li, Actuary, to Daniel Nickerson, Head of Trust Fund Operations and Proposal Estimates, and Karen Glenn, Chief Actuary, Social Security Administration, Office of the Chief Actuary (OCACT), "Current-Law OASDI Payable Percentages: Current-Law Revenue as a Percent of the Cost of Providing Scheduled Benefits Through Year 2100—Information," August 5, 2026. Notes: Projections are based on the 2026 intermediate assumptions. In calculating the percentage of payable benefits, OCACT limits revenue from the taxation of benefits to the amount that would be obtained from the payable benefits.

What Is the Magnitude of the Shortfall?

The 2026 Social Security trustees report shows the 75-year actuarial deficit for the Social Security trust funds. The actuarial deficit is the difference between the discounted present value of scheduled benefits and the discounted present value of future taxes plus asset reserves held by the trust funds. As a share of taxable payroll, it can be viewed as the amount by which the payroll tax rate would have to be increased to support the level of benefits scheduled under current law throughout the 75-year projection period (or, roughly the amount by which the payroll tax rate would have to be increased for the trust funds to remain fully solvent throughout the 75-year period). The 2026 annual report projects that the 75-year actuarial deficit for the OASI trust fund is equal to 4.55% of taxable payroll.⁷⁶ On a combined OASDI trust fund basis, the 75-year actuarial deficit would be slightly less negative—offset by the more advantageous position of the DI trust fund—at 4.42% of taxable payroll.

What Happens to Benefits in the Case of Insolvency?

The Social Security Act states that every individual who meets program eligibility requirements is entitled to benefits.⁸⁰ As an entitlement program, the federal government is legally obligated to pay Social Security benefits to all those who are eligible for them as set forth in the statute.⁸¹ If the federal government fails to pay the benefits stipulated by law, beneficiaries could take legal action. Insolvency would not relieve the government of its obligation to provide benefits.

However, the Social Security Act specifies that benefit payments shall be made only from the trust funds.⁸² Another law, the Antideficiency Act, prohibits government spending in excess of available funds.⁸³ Consequently, if the Social Security trust funds become insolvent—that is, if current tax receipts and accumulated assets are not sufficient to pay the benefits to which people are entitled, as the OASI trust fund is projected to experience in 2032—the law effectively prohibits full Social Security benefits from being paid on time.

The Antideficiency Act prohibits government agencies from paying for benefits, goods, or services beyond the limit authorized in law for such payments. The authorized limit in law for Social Security benefits is the balance of the trust fund. The Social Security Act does not stipulate what would happen to benefit payments if the balance of the trust funds is not sufficient to cover the benefit payments. Absent any change to current law, a trust fund reaching insolvency would essentially convert that program to a purely pay-as-you-go system, in which program costs (i.e., benefits paid) are equal to program tax revenues on an annual basis and there are no trust fund assets.

Possible Scenario #1: Full Delayed Payments

The 1982 annual trustees report, which was released in April of that year, stated that in the absence of legislative action, the OASI trust fund would soon be insolvent:

Without corrective legislation in the very near future, the Old-Age and Survivors Insurance Trust Fund will be unable to make benefit payments on time beginning no later than July 1983…. If assets are allowed to decline to the point where their amount at the end of a particular month is less than the benefit payments falling due on the third of the following month, inability to pay some benefits on time for that month would result.⁸⁴

That language (i.e., "on time") suggests that after insolvency, full benefit payments would have been made on a delayed schedule. To see how a delay could affect beneficiaries, consider the current Social Security benefit payment schedule, shown in Table 12.

For beneficiaries who first file for benefits after May 1997, payment dates are generally based on their day of birth. For example, if the worker covered by Social Security was born on the first of the month (e.g., June 1), his or her benefit payment is made on the second Wednesday of each month.⁸⁵

If trust fund insolvency were to cause delays in the payment schedule, benefit payments could be made in the usual order—first to those who receive benefits on the third day of the month, then to those on the second Wednesday of the month, and so on, until the remainder of the trust funds' balance reached zero. At that point, no benefits could be paid until more tax receipts were credited to the trust funds. Then benefit payments could continue where they left off when the trust funds ran out. This cycle could continue indefinitely. The timing of these payments would be unpredictable. Additionally, the benefit payment schedule is not established in statute and may be changed at the discretion of the Commissioner of Social Security.⁸⁶

Possible Scenario #2: Reduced On-Time Payments

The 2026 annual trustees report states:

After reserves are depleted, the trust funds would be unable to pay scheduled benefits in full on a timely basis if annual income were less than annual cost.⁸⁷

This language is seemingly more neutral than previous (i.e., 1982) language and could be interpreted to mean reduced benefits could be paid on a timely basis after a trust fund reached insolvency. Paying reduced but timely benefits could take many forms. For instance, all benefits could be reduced proportionally across the board, such that projected payable benefits in any year would resemble those in Figure 2. In such a scenario, all beneficiaries would experience the same percentage reduction in benefit amounts. Alternatively, reduced benefits could be structured to protect certain groups, such as disabled or low-income beneficiaries. For instance, some researchers argue that in the event of trust fund insolvency, the President has "considerable discretion to allocate those limited funds in a reasonable manner."⁸⁸ This research further posits that the President could not reduce total benefits paid by more than an amount needed to ensure costs do not exceed revenues, and that the President could not provide benefits to any beneficiaries (i.e., low-income beneficiaries) that were higher than calculated under law.⁸⁹

What Can Congress Do?

Under current law and intermediate assumptions, the trustees estimate that in about six years the OASI program will be unable to pay scheduled benefits in full and on time. Generally speaking, the types of measures needed to eliminate the projected shortfall and maintain the program's solvency can be characterized as revenue-increasing or cost-reducing.

In practice, a wide range of solvency-related measures are available to lawmakers. For instance, each year the SSA's Office of the Chief Actuary updates a list of financial effects for over 100 commonly proposed solvency-related measures.⁹⁰ The Congressional Budget Office provides a similar function in its Options for Reducing the Deficit and Social Security Policy Options.⁹¹ These reports generally agree that no single provision is likely to entirely eliminate the financial shortfall.⁹² For this reason, many proposals addressing the program's finances include both revenue-increasing and cost-reducing measures. The Social Security Amendments of 1983 (P.L. 98-21)—commonly considered the last major reform to the program—included measures that increased revenues (e.g., income from the taxation of benefits), reduced costs (e.g., increase of the retirement age), and expanded coverage (e.g., for newly hired federal employees), among many other provisions.⁹³ That said, the solvency-related issue facing lawmakers today is larger.⁹⁴ For this reason, the trustees recommend that "lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them. Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits."⁹⁵ Depending on what provisions, if any, might be included in future legislation, program changes may affect groups of workers and beneficiaries differently. Policy changes implemented sooner rather than later, in addition to requiring cost-reducing or revenue-increasing provisions that are smaller in magnitude, would allow current workers and beneficiaries more time to adapt.

Appendix. Supporting Tables and Figures

Figure A-1. Historical and Projected Beneficiaries for the Old-Age and Survivors Insurance (OASI), Disability Insurance (DI), and Combined OASDI Programs 1945-2100 (in thousands)

Source: The 2026 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, June 8, 2026, Table IV.B4, https://www.ssa.gov/OACT/TR/2026/tr2026.pdf. Notes: Projected values for 2026-2100 are shown in dashed lines.

Figure A-2. Monthly Scheduled Benefits for Retired Hypothetical Workers at Retirement Age 1945-2100 (in 2026 dollars)

Source: The 2026 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, June 8, 2026, Table V.C7, https://www.ssa.gov/OACT/TR/2026/tr2026.pdf. Notes: Projected values for 2026-2100 are shown in dashed lines. Dollar amounts are adjusted to 2026 dollars using the Consumer Price Index (CPI) series in Table VI.G1 of the 2026 annual report. These figures use SSA's Office of the Chief Actuary's scaled factors for hypothetical earners. Very low, low, medium, and high earners' career-average earnings levels are 25%, 45%, 100%, and 160% of the average wage index, respectively.

Figure A-3. Historical and Projected Covered Workers per Beneficiary 1980-2100

Source: The 2026 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, June 8, 2026, Table IV.B4, https://www.ssa.gov/OACT/TR/2026/tr2026.pdf. Notes: Projected values for 2026-2100 are shown in dashed lines. The low-cost set of assumptions represents a future experience that is the most advantageous to the program's financial status. The high-cost set of assumptions represents a future experience that is the least advantageous to the program's financial status. The trustees use the intermediate set of assumptions to illustrate their best guess as to the future experience.

Footnotes