Social Security’s 75-year funding gap now exceeds $25 trillion, and benefits for retired workers and survivors of deceased workers could be slashed in just seven years.
Popular opinion online suggests that lawmakers raided Social Security’s trust funds, which is why the program’s foundations are now shaky.
In fact, some ongoing demographic changes are to blame for Social Security’s financial woes.
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The 90th anniversary of the establishment of the social security system in 2025 is of historic significance. This marks the first time average monthly benefits for retirees have topped $2,000. Additionally, a 2.8% cost-of-living adjustment (COLA) will benefit the program’s more than 70 million traditional beneficiaries through 2026, representing the fifth consecutive year of benefit increases of at least 2.5%. It’s been almost thirty years since this last happened.
But despite these history-making moments, the foundations of America’s leading retirement plans are crumbling. While there are many factors that contribute to Social Security’s precarious financial future, the culprits are often our elected officials in Congress.
Image source: Getty Images.
Each year, the Social Security Board of Directors releases a report that takes an in-depth look at the financial prospects of America’s top retirement plans. It allows anyone to see where Social Security’s income comes from and track where those dollars end up.
The most interesting aspect of the annual trustee report, however, is the forward-looking estimate of the solvency of the Social Security Trust Fund.
According to the 2025 Social Security Trustees Report, the program is projected to have a long-term funding gap of $25.1 trillion. In this example, “long term” is defined as 75 years after the report is published (to 2099).
Arguably more concerning are the short-term forecasts for the Old Age and Survivors Insurance Trust (OASI). OASI is a fund that distributes monthly benefits to retired workers and the survivors of deceased workers.
By 2033, OASI will exhaust its asset reserves – the excess revenue it has collected over expenditures since its inception, the report said. While OASI and Social Security (as a whole) are not in danger of going bankrupt or stopping payments, retired workers and the survivors of deceased workers may need to take significant benefit cuts of up to 23% over seven years if OASI’s asset reserves are depleted.
There is clearly something wrong with Social Security. Unfortunately, the popular perception of a problem is not necessarily the correct answer.
The Social Security Administration’s OASI is expected to exhaust its asset reserves within seven years. Year-end U.S. Old Age and Survivors Insurance Trust Fund asset data provided by YCharts.
If you were to peruse Social Security-related message boards and threads on social media platforms, you would almost certainly come across one or more posts accusing Congress of stealing Social Security trust funds and using them to fund wars and other government spending. Individuals who believe Congress raided the Social Security trust funds often suggest that returning those funds, with interest, would address the program’s shortfall in funding obligations.
While similar posts tend to generate a lot of interest and likes on social media platforms, they couldn’t be more wrong.
When the Social Security Act was signed into law in August 1935, one of its many provisions was that the program’s asset reserves should be invested in specially issued interest-bearing government bonds. This means that any revenue collected by OASI and the Disability Insurance Trust (DI) that is not used to pay benefits or pay administrative expenses will be invested in these specially issued bonds, as required by law.
These specially issued government bonds are currently paying interest and are backed by the full faith of the United States Government. Except for a computer problem in 1979 and a very short-term legislative delay, the United States has not defaulted on an outstanding debt in more than 200 years. The interest income generated by its asset reserves is one of the three major sources of income for social security.
Additionally, anyone interested can track exactly how many special issue bonds and debt obligations Social Security holds in its portfolio at any given time. As of the end of November 2025, the total investment in OASI and DI was US$2.555 trillion, with an average interest rate of 2.641%.
This portfolio ultimately demonstrates that the program adheres to the provisions of the Social Security Act, as required by law, and that every penny is fully accounted for in the specially issued government bonds. Lawmakers stole nothing and nothing was lost in the shuffle.
Hypothetically, if the U.S. government redeemed the $2.555 trillion and simply returned it to the Social Security Administration, the program would lose more than $60 billion in projected annual interest income. In other words, if the federal government doesn’t borrow this excess revenue, Social Security’s financial outlook will seriously deteriorate.
Image source: Getty Images.
With the claim that Congress stole Social Security clearly debunked, attention can turn to the actual factors contributing to the program’s financial woes—ongoing demographic changes.
Some demographic changes are well known or have been going on for quite some time. For example, baby boomers have been leaving the labor force for years, putting pressure on the worker-to-beneficiary ratio. There simply aren’t enough new workers entering the labor market to offset those retiring.
Life expectancy is also significantly longer now than it was when Social Security sent out its first checks to retired workers in January 1940. Frankly, Social Security was never designed to support beneficiaries for decades.
However, a variety of unknown demographic changes are also adversely affecting America’s leading retirement plans.
For example, the Centers for Disease Control and Prevention reports that U.S. fertility rates will hit a record low in 2024. For a generation to have enough children to replace itself, each woman would need to have 2.1 children. In 2024, the U.S. fertility rate will be below 1.6. This is expected to have a negative impact on worker-to-beneficiary ratios over the next decade.
Net legal immigration into the United States has also declined since the late 1990s. Social Security relies on a steady stream of legal immigrants entering the country. Because immigrants tend to be younger, they will remain in the labor market for decades, paying wages and salaries through a 12.4% payroll tax. Lower net legal immigration means lower payroll tax collections.
Social Security also faces income inequality issues. In 1983, approximately 90% of wages and salaries were subject to payroll taxes. But as of 2024, only 83% of protected employment income will be taxable. Simply put, more income is evading payroll taxes over time.
In the end, Congress should take its fair share of responsibility, but not for the theft. One can blame elected officials for sweeping these issues under the rug. The longer lawmakers wait to fix Social Security’s problems, the more expensive the solutions will be for workers and the program’s traditional beneficiaries.
Social Security has many problems that need to be solved, but congressional theft is not one of them.
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Did Congress steal trillions from Social Security? The answer couldn’t be clearer. Originally posted by The Motley Fool
