Social Security Administration Releases 2025 Report Predicting Trust Fund Shortfall in 2034

Last month we outlined several updates and changes made by the Social Security Administration (SSA) since the beginning of the year. In follow up thereto, the SSA has recently released "The 2025 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds" (hereinafter "SSA's Report" or "report").^[1]

The SSA's Report, in main part, provides an overview of the current and projected financial status of the Social Security program, along with detailed actuarial estimates, demographic and economic assumptions, and historical data about the SSA trust funds.

Of note the report concludes, in part, that, based on current assumptions, the Social Security trust fund will be depleted and will be unable to pay full benefits starting in 2034, at which time income would be sufficient to pay 81% of scheduled benefits, and outlines several potential options to preserve the program's fiscal integrity into the future.^[2]

To help place this report in context, the author provides a brief background regarding the SSA program, followed by a high-level review of the report's key findings and conclusions as follows:

Background

The SSA provides monthly payments to qualifying workers and their families at retirement, death, or disability through the Old-Age, Survivors, and Disability (OASDI) program.^[3] This program is broken down into two parts: the Old-Age and Survivors Insurance (OASI) program provides benefits to retired workers, their families, and the survivors of deceased workers, while the Disability Insurance (DI) program provides benefits to disabled workers and their families.^[4]

The SSA's Report notes that as of the end of 2024, the OASDI program provided benefits to approximately 68 million people, broken down as follows:

• 54 million retired workers and their dependents,
• 6 million survivors of deceased workers, and
• 8 million disabled workers and their dependents.^[5]

The OASDI program is funded in several ways, including, primarily, through payroll taxes paid by employees, employers, and the self-employed on earnings covered by Social Security, which accounted for 91.2% of the SSA's income in 2024.^[6] The Department of the Treasury invests all SSA trust fund income in interest-bearing securities, which accounted for an additional 4.9% of SSA income in 2024.^[7] The remaining 3.9% of SSA income in 2024 came from the taxation of OASDI benefits.^[8] The report notes that benefit payments accounted for 99.1% of the OASI program's cost in 2024, with program expenses accounting for 0.5% the program's cost.^[9]

According to the SSA's Report, the total cost of the OASDI program in 2024 was $1.485 trillion, while the program had a total income of $1.418 trillion.^[10] The report further indicates Social Security's total cost exceeded the program's total income in 2021 and is projected to be higher than its total income for all future years. ^[11] At the conclusion of 2024, the program's reserves were $2.721 trillion, down from $2.788 trillion at the beginning of the year.^[12]

Report methodology and impacts

The SSA's Report uses numerous future assumptions about demographic, economic, and SSA program factors to provide predictions about the future income and cost of Social Security programs.^[13] For instance, the report considers demographic assumptions about fertility rates,^[14] mortality^[15] and life expectancy rates,^[16] immigration,^[17] and estimates as to the total population of the United States.^[18] The report also attempts to estimate a range of economic assumptions, including future productivity,^[19] inflation,^[20] earnings^[21] and wage growth,^[22] and labor force projections.^[23]

Several specific changes since last year's report are projected to impact Social Security's financial status, including:

• Social Security Fairness Act of 2023: This law repealed the Windfall Elimination Provision and Government Pension Offset, which had reduced or eliminated Social Security benefits for people receiving pensions based on work not covered by Social Security. The elimination of this provision increases the Social Security benefits for people who worked in jobs not covered by Social Security.^[24]
• Past Relevant Work Changes: On April 18, 2024, the SSA reduced from 15 to 5 years the time period that the SSA considers when determining whether an individual's past work is relevant for purposes of making disability determination.^[25] The report notes this is expected to lead to an increase in disability awards and also to slightly reduce labor force participation.^[26]
• Demographic Changes: The report notes that recent birth data indicate total fertility rates were lower than past predictions and that assumed levels of temporary or unlawfully present immigrant entrants have been increased. ^[27] The report also notes there have been updates to the data for mortality, the historical population, marriage, and divorce.^[28]

Report findings and options

As noted above, the SSA's Report concludes, in main part, that Social Security's trust funds project to be depleted in 2034, at which point the combined income would be anticipated to cover approximately 81 percent of the Social Security program's cost.^[29] In terms of addressing this, the report suggests that there are several policy options available to close or reduce this projected Social Security financing shortfall, including:

• Raising the tax rate on workers and employers,
• Raising the maximum level of taxable earnings^[30] ,
• Lowering benefits for some or all beneficiaries,
• Changing program parameters, or
• A combination of approaches.^[31]

In conclusion, the Trustees recommend that the projected shortfalls be addressed timely, to give workers and beneficiaries time to adjust to any changes.^[32]

Going forward, Verisk will continue to monitor developments in this area and provide updates as warranted.