Will Social Security Run Out? What Every Woman Needs to Know Now
If I had a dollar for every time someone said, “Social Security won’t even be there…” I’d probably be able to fund my own retirement. It makes me shudder, because it completely misunderstands how the program works and spreads unnecessary fear. So, let me invite you to be the smartest woman in the room and demystify how Social Security really functions—and why it isn’t going away.
1. How Does it Actually Work?
Let’s set the stage. The Social Security Administration was created in 1935, with the first ongoing monthly benefits paid in 1940. Like most government programs, there are two main components to understand: the spending (the benefits being paid out) and the revenue (how those benefits are funded).
Let’s set the stage. The Social Security Administration was created in 1935, with the first ongoing monthly benefits paid in 1940. Like most government programs, there are two main components to understand: the spending (the benefits being paid out) and the revenue (how those benefits are funded).
In this case, the primary source of income is Social Security payroll taxes. If you earn a paycheck, take a look at your pay stub. Both employers and employees each pay 6.2% of wages in Social Security tax, up to a maximum earnings limit (we’ll come back to that in a moment).
Now, let’s rewind to the program’s early days. At the time it was created, full retirement benefits began at age 65—but life expectancy was only 63. (Pause and let that sink in.) From the start, the expected benefits were modest simply due to demographics.
As life expectancy rose, there was another big shift: the Baby Boomers entered the workforce. And they’re called Boomers for a reason—there were a lot of them. Suddenly, a massive workforce was paying payroll taxes, creating a surplus. That surplus was directed to the Social Security Trust Fund to earn a bit of investment income.
Still with me? Payroll taxes coming in, benefits going out, and the surplus storing in the Trust Fund
2. So, what’s the actual problem?
Fast forward to recent history. Life expectancy has continued to rise, so retirees are collecting benefits longer than in 1935. And that massive generation—the Baby Boomers—began to retire and draw Social Security. Suddenly, the scales tipped.
Payroll taxes alone can’t fully cover all the benefits being claimed. No more surplus. In fact, the Trust Fund began to supplement payroll taxes to pay out full benefits.
Isn’t that the point of the Trust Fund? Yes. But here’s the rub: the Trust Fund is running out. (Important note: “Social Security” itself isn’t running out—just the Trust Fund.) When it depletes, the only money available to pay benefits will be the incoming payroll taxes.
That’s not nothing—actually, it’s about 77% of promised benefits. But no one wants a 23% pay cut in retirement. Without any action, the Trust Fund is estimated to run out by 2033, at which point benefits would have to be reduced to what payroll taxes alone can cover.
3. Still sounds problematic…So what’s the solution?
Remember those two main components—spending and revenue? Any solution will either:
a) Decrease spending,
b) Increase revenue, or
c) Use some combination of both.
The good news: solutions are already being discussed and drafted in Congress. Maybe it’s raising the maximum wage base (currently capped at $176,100). Maybe it’s gradually increasing the claiming age. Maybe it’s adding funding from general income taxes. Maybe it’s a combination of these ideas.
The bad news? Congress doesn’t have a stellar record of tackling big issues proactively, and the alarm bells won’t truly sound until 2033. So, while proposals are circulating and groundwork is being laid, we may not see a final solution for a few years yet.
4. How can I share this amazing knowledge?
Show-off your knowledge the next time you hear someone scoff, “I’m not counting on anything from Social Security when I retire…” you’ll be ready. You can say, “You should—payroll tax revenues alone are estimated to cover 77% of all benefits even if the Trust Fund is depleted.”
As they stare, dazzled by your brilliance, smile and offer to send them this article so they can learn more.
This is a great time to talk with your trusted wealth advisor about your particular situation. I’m here to help; email me with questions or to set up a call at lobrien@xmlfg.com.
* Social Security Trust Fund estimates are reviewed annually. The numbers included in this article were based on the 2025 report and could change in the future. This communication is for informational and educational purposes only. No content or reference is intended to be a recommendation for the sale or investment in any product, strategy or service nor should it be perceived as individual advice. Please seek the advice of a financial advisor regarding your particular financial situation. Visit xmlfg.com for more information.
