What is the Social Security Trust Fund and Will It Be There for You? 

Generation X members (born 1965 to 1980) and millennials (born 1981 to 1996) have been issued a stark warning by some academic researchers: Without changes to tax laws and other government benefit programs, you may not receive full Social Security benefits upon retirement. That’s because if Congress does not find new revenue streams for the Social Security Trust Fund, their benefits could be reduced approximately 22% by around 2033.¹  

Why will the trust fund have a shortfall in less than a decade? There are several reasons such as the large number of Baby Boomers (born 1946 to 1964) drawing Social Security in retirement, longer life expectancy, and the Social Security tax limit. Regardless, if you expect to start taking Social Security around 2033 or later, you can take action now to help ensure you’re financially secure in retirement. Keep in mind that there are many factors to contemplate regarding when to take Social Security — but the main point is that it is a universal system with universal rules and your own situation determines how and when you should start your benefits, especially if you’re married.  

This article provides insight into the current Social Security dilemma and offers a path forward for individuals and families who may have concerns about reduced benefits. 

Understanding the Social Security Trust Fund 

There are two funds that provide payroll tax income to the Social Security Trust Fund, which the Social Security Administration (SSA) uses to pay benefits: the Federal Old-Age and Survivors Insurance Trust Fund (OASI) and the Federal Disability Insurance Trust Fund (DI). Specifically, the OASI is at risk of depletion by around 2033, while the DI is estimated to pay full benefits through 2098.²   

Since the first Gen Xers will reach the full retirement age of 67 in the year 2032, one year before the OASI could reach depletion, their generation is on track to be the first retirees who won’t get full Social Security benefits. However, there are viable policy options that could put the program on sound footing for years to come, such as increasing the full retirement age, increasing payroll taxes on high-income earners and reducing their benefits, and diverting revenue from other taxes into the Social Security Trust Fund. But how Congress addresses the challenges with Social Security is yet to be seen. 

New Social Security numbers for 2025 

The annual cost-of-living adjustment (COLA) tax rate for 2025 is 2.5%, resulting in higher monthly Social Security benefit payments of approximately $49 for the average retiree and $75 for married couples in which both partners are receiving benefits.3 For 2025, the estimated average monthly payments are $1,976 for individual retirees and $3,089 for married couples in which both partners are receiving benefits.³   

Additionally, the Social Security tax limit for 2025 is $176,100. This means that once you earn that amount from your employer during the year, Social Security taxes will no longer be deducted from your paycheck for the remainder of the year. The limit gets adjusted every year for inflation; it was $168,600 for 2024, $160,200 for 2023, and $147,000 in 2022.⁴  The increase of $13,200 from 2022 to 2023 is the largest on record.  

Should you take Social Security benefits early? 

You may be wondering if you should take Social Security as soon as you can, at age 62, to ensure you have full benefits throughout retirement. To be sure if this is the right move for you, consider the impact to your income amount. If you take your benefits before full retirement age, currently 67, you could have a permanent reduction in payments.  

Using the average monthly Social Security benefit for retirees of $1,976, if you begin taking benefits early at age 62 (for those born in 1960 and later), your monthly payment drops by 30% to $1,383; spousal benefits drop by 35%. If you wait until age 67 (for those born in 1943 and after), you receive an 8% annual increase until age 70. Additionally, the annual Cost of Living Adjustment (COLA) is based on your benefit amount, so your monthly payments are likely to increase more each year than if you took Social Security early. When you factor in the additional income from your salary between ages 62 and 67, along with extra contributions to a 401(k) or individual retirement account (IRA), your retirement savings could be significantly enhanced. 

Now, consider the scenario where benefits are expected to reduce by 22% in 2033. If we apply that decrease to the average 2025 monthly payment at age 67 of $1,976, it results in $1,541. Despite this reduction, it remains higher than the 30% reduced amount of $1,383 if taken early at age 62. The $139 difference may not seem substantial, but when you factor in the 8% increase between ages 67 and 70, along with annual COLA adjustments, the long-term difference could be significant. 

Preparing smartly for the future 

It’s almost impossible to predict if you’ll live to age 67, when you would receive higher Social Security benefits compared to claiming them at age 62, or if you’ll reach the average life expectancy age of approximately 79 years or longer. However, relying solely on Social Security benefits in retirement is likely to present challenges with lifestyle affordability. That’s why having a financial plan with diversified income streams is crucial to helping achieve financial security in retirement. A financial plan can help you manage how much you save, spend, and invest. 

For instance, if you reach the Social Security tax limit in 2025, the additional amount you receive in your paycheck for the rest of the year could go into an IRA where it will have the power of compound growth potential. Or you may want to build up a health savings account (HSA) for medical expenses in retirement, which is another opportunity for compound growth potential. 

Depending on your personal situation and assets, you may choose to start drawing monthly payments at age 62 from a 401(k) or IRA if you retire and not have to start Social Security benefits until age 67. 

As mentioned in the beginning of this article, your own financial situation dictates the right timing for you to take Social Security, not the system. There are many aspects of planning to consider such as tax consequences, leaving a legacy for your children, working while also getting benefits, spousal and survivor benefits, your retirement savings account assets, Social Security growth rates, and so much more. 

A comprehensive review of where your finances are now can help with developing a financial plan for where you want to go. The plan should cover your personal finances, investments, taxes, retirement, estate, insurance, and more. Preparing now is one of the best ways to help provide certainty for the future.  

Taking action 

If you’re a Mercer Advisors client, you know that retirement planning is an ongoing process that requires reviews and adjustments. Contact your wealth advisor if you experience changes in your financial priorities, life events, or other situations that may necessitate modifications to your retirement plan, so it aligns with your objectives. 

Not a Mercer Advisors client? We have nearly 40 years of experience helping clients throughout their retirement journey and can help you figure out the best course forward for a successful retirement. Our unified team of planners, investors, accountants, and estate specialists collaborate with you to design and execute your financial plan. Let’s talk. 

¹ “Lawler, Latimer favor study of Social Security’s future as fund faces depletion by 2033.” USA Today, 15 Jan. 2025. 

² “Social Security will not be able to pay full benefits in 2035 if Congress doesn’t act.” CNN, 6 May 2024.  

³  “Social Security COLA Is 2.5% for 2025: What To Know.” Kiplinger, 21 Oct. 2024. 

⁴  “Social Security Wage Base.” Wikipedia, 22 Jan. 2025.