This article is part of the Retirement Financial Life Equation (RFLE) series. It was originally published June 21, 2023 | Updated December 2025.
The 2025 Social Security Fund Trustees’ Report was released in June 2025, and here’s the latest on Trust Fund solvency:
The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, will be able to pay scheduled benefits on a timely basis until 2033, unchanged from last year’s report. The fund’s reserves will deplete at that time, and continuing tax income will be sufficient to pay 77 percent of scheduled benefits.
The combined OASI and DI Trust Funds are projected to be depleted in 2034, one year earlier than last year’s projection. At that time, continuing income would be sufficient to pay 81 percent of scheduled benefits.
This is a regular feature of the annual report, and it has both current and future benefit recipients concerned—and rightly so.
However, if you read some headlines about it, you might think Social Security is going away in 2033 or 2034. In many cases, the headlines cite imminent insolvency but fail to mention until much later in the article that tax revenues should be sufficient to pay 77-81% of scheduled benefits. (These headlines are designed to get clicks and generate anxiety.)
Social Security is a vital program that provides financial support to over 70 million Americans. It keeps many retirees above the poverty line. And, as the trustees’ report highlights each year, there are valid reasons to be concerned about its long-term viability.
But sensationalized coverage and political rhetoric play off retirees’ fears, creating confusion and doubt. As a result, many myths surround the Trust Fund and other aspects of the program. These myths come from misleading information, resulting in misunderstandings about how the program works, who is eligible for benefits, whether they’ll ever receive them, and how much they’ll receive.
These misunderstandings can cause people to make unwise benefit-claiming decisions and hold inaccurate benefit expectations.
In this article, I discuss some of the most common Social Security myths that confuse people and cause many to be cynical about the future viability of the system and concerned about their retirement financial stability.
And as you’ll see, there are real problems. But they’re fixable if Congress is willing to act.
Myth #1: Social Security Benefits Are Guaranteed
According to many people—especially politicians—the federal government guarantees Social Security benefits. They say the program is a mandatory retirement, disability, and survivor benefits program, and the government guarantees it will pay out benefits to eligible individuals who have paid into the system.
So, is it guaranteed? Well, yes and no.
In other articles, I’ve often called it a “guaranteed lifetime inflation-adjusted income annuity.” I wrote that because it acts like one, not because it truly is guaranteed. The Trust Fund functions somewhat like an annuity—it’s a pool of assets funded with payroll tax receipts that pay out benefits—but it’s not run the same way as a corporate pension fund or an insurance company-sponsored annuity.
When you pay into Social Security, you’re not contributing to a deferred income annuity that grows tax-free until you annuitize it. Nor is it a government-sponsored retirement savings account like an IRA or 401(k).
Instead, you contribute to the program through payroll taxes (either FICA or SECA). Those contributions are placed in the Social Security Trust Fund, which holds surplus payroll taxes and invests the funds in special Treasury bonds backed by the U.S. government’s full faith and credit.
The Trust Fund is used to pay benefits to current retirees (and their survivors and people with disabilities). When you retire, those still working and paying taxes will cover your benefits, and so on. (For this reason, some call it a “Ponzi scheme.”) Benefits are based on lifetime earnings, not how much you paid into the system—you have no “account balance” to draw from.
This seems to suggest benefits are “guaranteed,” at least as long as the Trust Fund remains solvent and the government continues to collect payroll taxes. That’s true under current law, but the law is not a hard, fast “guarantee.”
According to the Cato Institute (and many others agree), Social Security benefits are not legally guaranteed:
They are not legally guaranteed because workers have no contractual or property rights to any benefits. In two landmark cases, Flemming v. Nestor and Helvering v. Davis, the U.S. Supreme Court ruled that Social Security taxes are not contributions or savings but taxes, and that Social Security benefits are simply a government spending program, no different than farm price supports. Congress and the president may change, reduce, or even eliminate benefits.
In other words, benefits are paid based on the availability of funds, the will of the U.S. Government, and the decisions of politicians. They can raise eligibility ages and reduce benefits if they want to. So, benefits are neither legally (contractually) nor politically (legislatively) guaranteed. The government has an obligation to pay only to the extent that funds are available.
Perhaps that’s why bills have been introduced in Congress “to guarantee the right of individuals to receive Social Security benefits under title II of the Social Security Act in full with an accurate annual cost-of-living adjustment.”
Benefits are not guaranteed economically either because the government is projected to have insufficient reserves in about eight years (see next myth). If nothing changes, Congress will have to reduce benefits or raise taxes.
Myth #2: Social Security Will Stop Paying Benefits When the Trust Fund Is Depleted in 2033
While it’s true that Social Security is facing funding challenges, it’s not accurate to say the program will cease and no longer pay any benefits in 2033.
What’s happening is that the program is slowly becoming “insolvent” (unable to fully fund anticipated future liabilities), which isn’t the same as not being able to meet any future liabilities.
The program is becoming insolvent mainly due to demographic changes: the retiree population growing faster than the working population, and people living longer. As that happens, benefit payouts increase faster than incoming tax receipts, which requires more benefits to be paid from Trust Fund reserves.
The critical point: Stipulating that the Social Security Trust Fund will likely be depleted by 2033 (for OASI) or 2034 (for combined funds) unless Congress intervenes doesn’t mean the program will stop paying benefits.
As stated in the trustees’ report, Social Security will still be able to pay out approximately 77% of retirement benefits (81% combined) from ongoing payroll tax receipts even after the Trust Fund is depleted.
That’s still a significant cut that would hit many beneficiaries hard, so something needs to be done soon. But it’s very different from receiving no benefits at all.
The 2025 Report Details
Key findings from the 2025 Trustees Report:
- OASI Trust Fund depletion: 2033 (unchanged from 2024 report)
- Combined OASDI depletion: 2034 (one year earlier than 2024 report)
- Percentage payable after OASI depletion: 77%
- Percentage payable after combined depletion: 81%
- 75-year actuarial deficit: 3.82% of taxable payroll (up from 3.50% in 2024)
Why the outlook worsened slightly:
- The Social Security Fairness Act (eliminating GPO/WEP) increased benefits for public employees
- Extended low fertility rate projections
- The projection period moved forward one year
- Downward revision in the share of GDP going to workers
Options Available to Congress
In addition to ongoing payroll tax receipts, we must remember that the government has several options:
- Raise the payroll tax cap (currently $176,100 for 2025, rising to $184,500 for 2026)
- Increase the payroll tax rate (currently 6.2% for employees)
- Raise the Full Retirement Age gradually
- Adjust the benefit formula for higher earners
- Means-test benefits for wealthier retirees
- Use general revenue to supplement the Trust Fund
Government budgets are “fungible,” meaning money can be moved from one category to another. Whether that’s wise is debatable, but options exist.
On the bright side (if there is one), there are many proposals for reforming the program to ensure its long-term sustainability. Congress took action in 1983 when the program nearly depleted its reserves, including raising the full retirement age, increasing the payroll tax rate, and introducing an income tax on benefits.
Whether Congress will act on any of these again remains to be seen. But the closer we get to 2033, the more likely action becomes—though the changes may be more abrupt and painful than if Congress acted sooner.
Myth #3: Congress Uses Social Security Funds for Other Purposes
The government is often accused of either taking money from the trust fund and spending it or borrowing from it and leaving the trust with only IOUs. There is some truth here, but this isn’t totally accurate.
Social Security is a separate program, self-funded through payroll taxes. However, because there has historically been a surplus held in the Trust Fund, the federal government borrows from it.
Here’s how it works:
Social Security’s tax revenue must be invested in special U.S. Treasury securities by law. The federal government can then use the proceeds from those securities for various programs. However, the Treasury has to pay them back with interest. Social Security sells securities and uses the return of principal to pay benefits.
This borrowing does not mean the government raids or steals from Social Security. The government has always paid them back in full, with interest, which increases the Trust Fund’s assets and income.
That said, the proceeds from Treasury bonds sold to the trust funds can be spent on anything the government spends money on, which is how deficit spending is financed: debt. And this is what many people (rightfully, I would say) object to. But this is how it’s been done since the Trust Fund was created in 1939.
The government uses the proceeds to finance the debt, but the trust fund has never been put into the general fund; it’s separate.
So yes:
- The trusts are a form of accounting for payroll tax revenue
- The trust holds only special Treasury bonds (“IOUs” if you want to call them that)
- When the trust bought the bonds, the proceeds were spent on government programs
This is the same as pension funds, countries, and individuals having “IOUs” from the federal government in the form of bonds.
Is this a good way to fund a government? Well, I’ll leave that to you to decide.
Myth #4: Social Security Benefits Increase Every Year for Inflation
Cost of Living Adjustment (COLA) is an increase in Social Security benefits paid to beneficiaries to account for the rising cost of living. The adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
The COLA adjustment is calculated based on the percentage increase in the CPI-W from the previous year’s third quarter to the current year’s third quarter. If the CPI-W increases, Social Security benefits will increase by the same percentage. There will be no COLA adjustment if the CPI-W does not increase or decreases.
Therefore, there isn’t necessarily an increase every year.
Recent COLAs:
- 2023: 8.7% (historically high due to 2022 inflation)
- 2024: 3.2%
- 2025: 2.5%
- 2026: 2.8% (announced October 2025)
Zero increases have only happened three times since the current COLA formula was adopted: 2010, 2011, and 2016. This is an automatic process that may or may not produce an increase in benefits. There is no governmental legislative action involved.
Important note: While COLAs help, they don’t always keep pace with actual retiree expenses, particularly healthcare costs, which typically rise faster than the CPI-W.
Myth #5: Social Security Benefits Are Permanently Reduced If You Keep Working
This is only partially true. Social Security does have an “earnings limit” or “earnings test” that can temporarily reduce benefits for working people. But it isn’t permanent.
This only applies to those who claim benefits before their Full Retirement Age (FRA) and continue working.
2025 earnings limits:
- Under FRA all year: Benefits reduced $1 for every $2 earned above $23,400
- Year you reach FRA: Benefits reduced $1 for every $3 earned above $62,160 (only counting earnings before the month you reach FRA)
- After reaching FRA: No earnings limit, no benefit reduction
Important: Social Security withholds (keyword: withholds) some of your benefits if your income from work exceeds these thresholds. Once you reach FRA, there is no earnings limit. Furthermore, Social Security adjusts your benefit so that, over time, you recoup the money they withheld. You don’t get it back all at once, but it’s factored into your benefit calculation at FRA. In that way, the reductions aren’t “permanent.”
It’s important to remember that although you will no longer have benefits withheld once you reach FRA, up to 85% of your benefits may be taxable based on your total income.
Myth #6: Social Security Benefits Will Cover Most of Your Retirement Expenses
Many wrongly assume that Social Security will cover most of their retirement expenses. Because it’s a “progressive” system, it does cover more pre-retirement income for lower earners than those with higher income. But for average and higher-income earners, the percentages are much less.
The reality:
- Social Security provides at least 50% of income for 4 in 10 retirees
- It provides at least 90% of income for 1 in 7 retirees
- The average Social Security retirement benefit in 2025 is approximately $1,976 monthly or about $23,712 annually
Social Security benefits replace about 37% of past earnings for someone who worked all their adult life at average earnings and retires at age 67 in 2025. Even if you add spousal benefits of 50%, the total falls short of a comfortable retirement income for most couples.
Medicare’s Supplementary Medical Insurance (Part B) premiums are deducted from most retirees’ Social Security checks (currently $185/month in 2025), which can take a significant bite out of income even as age-related healthcare costs continue to rise.
Bottom line: Social Security was designed to be a foundation, not the entire structure, of retirement income. Most financial experts recommend having additional sources of retirement income through pensions, 401(k)s, IRAs, or other savings.
Myth Busting and the Path Forward
As we’ve seen, there are legitimate concerns about Social Security (and Medicare). However, there are also many misunderstandings, and sometimes things are misconstrued for questionable motivations.
In this article, I’ve attempted to dispel some myths while not suggesting everything is fine—it’s not. We must be vigilant and work to influence Congress to take appropriate action instead of the partisan demagoguery we often see.
What can you do?
- Understand the facts, not the myths
- Make informed claiming decisions based on reality, not fear
- Plan for Social Security as part—not all—of your retirement income
- Contact your representatives in Congress to encourage action
- Stay informed about policy proposals
We should also be grateful for the common grace of the Social Security program and how it helps so many:
The Lord is good to all, and his mercy is over all that he has made. (Psalm 145:9, ESV)
Social Security, despite its challenges, represents a remarkable societal commitment to protecting our elderly, disabled, and survivors. It deserves our appreciation—and our active engagement in ensuring its continued viability for future generations.