Social Security’s Funding Shortfall Falls to Policymakers
Reforms to fix Social Security’s insolvency are possible, but lawmakers will need to enact bipartisan efforts to fix the agency.
That’s the ultimate finding from the Center for Retirement Research (CRR) at Boston College, which analyzed the latest Social Security Trustees report from the U.S. Department of Treasury in a new brief.
The Social Security Trustees report found that, without government intervention, the Old-Age and Survivors Insurance (OASI) Trust Fund could begin depleting as early as 2032. These trust funds include reserves that pay out Social Security benefits to retirees every month.
The insolvency would trigger an automatic 22% in Social Security benefits, meaning beneficiaries would only receive 78% of their total benefit each check. This cut would rise gradually to 38% by 2100.
Three main elements to fund’s depletion
The report observed three factors that have impacted the funds, including reduced fertility rates and lower levels of immigration into the U.S. Tax provisions included in President Donald Trump’s One Big Beautiful Act (OBBBA) will also negatively affect revenue for the trust funds.
“The Trustees’ most significant improvement is a long-overdue recognition that the fertility rate is not likely to rebound, which means fewer workers paying payroll taxes and thus, lower revenues. The report also recognized that lower levels of temporary/unlawful immigration will mean a smaller workforce and lower payroll taxes, and that the One Big Beautiful Bill Act, which permanently lowered income tax revenues on Social Security benefits, further lowered revenues,” wrote Alicia H. Munnell, senior advisor and founder of the CRR at Boston College.
While the Trustees acknowledgment of the lowered U.S. fertility rate is a welcomed admission, the brief questioned whether the report reduced the fertility-rate assumption enough. According to research, birth data for 2024 and 2025 indicates that fertility rates were lower than the numbers used in the Trustee’s report, and incorporating this new data further raises the deficit by 0.02% of taxable payrolls.
“The question remains whether the Trustees have reduced the fertility-rate assumption enough,” Munnell wrote. “If the U.S. rates follow those in other developed countries, some further reduction in the assumption may be necessary.”
Additionally, the Trump Administration’s severe push to halt undocumented immigration has decreased Social Security’s actuarial balance by 0.12% of taxable wages. According to the CRR at Boston College, Social Security’s immigration projections are calculated by estimating net flows for “lawful permanent residents and those present temporarily or unlawfully.” The 2026 report shows that 1,200,00 undocumented immigrants entered the U.S. in 2025, a decrease from 1,350,000 the year before.
“In total, immigration-related changes decreased Social Security’s actuarial balance by 0.18 percent of taxable wages,” Munnell added.
If the Trump Administration were to continue its restrictive policies on immigration until 2030, actuarial balances would decrease another 0.05% of payroll.
Lower revenues from the OBBBA are the main cause for Social Security’s deficit, the CRR at Boston College reports, as the projected 75-year deficit increased to 4.42% of taxable payroll, up from 3.82% in 2025. This is because the new legislation cements tax rates and tax brackets from the 2017 Tax Cuts and Jobs Act and increases and solidifies the larger standard deduction. It also incorporates a temporary standard deduction for those over age 65.
According to the CRR at Boston College, the overall effect of the OBBBA is a reduction in the OASDI actuarial balance of 0.16% of taxable payroll.
“These changes reduce taxable income for many Social Security beneficiaries, so retirees will pay less income tax on their Social Security benefits, and the Trust Funds will receive lower revenue than had been anticipated from the income taxation of these benefits,” wrote Munnell.
Options to save benefits
The brief notes that reserves will be able to pay full benefits until 2034 if the OASI and Disability Insurance (DI) trust funds are combined. According to the Trustees Report, DI trust funds will still be able to pay out 100% of scheduled benefits until 2034.
It also touched on two major changes that could improve the agency’s actuarial balance, such as revenue surges from rising workplace productivity and large increases in mortality.
While the report projects the average growth rate for productivity from 2025 to 2035 will be 1.62%, or 0.05 percentage points above the rate assumed in last year’s report, it does not consider workplace impacts from the rise of artificial intelligence (AI) technology.
Additionally, even as the report argues that updated data suggests higher death rates in the future, mortality rates are still complicated to estimate, the CRR at Boston College contends.
Ultimately, it will be left to policymakers to enact changes that will narrow Social Security’s insolvency, Munnell wrote.
“Numerous options are available on both the revenue and benefit sides to close the gap,” she concluded. “All that is needed is the political will.”
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news.