Social Security Is in Serious Financial Trouble. This Plan Could Save It $730 Billion

Whether you're a young worker or a senior already collecting benefits, you've probably wondered if you'll be able to count on Social Security throughout your retirement. There's a popular myth that the program will disappear completely in a few years, but we know that's not true. Social Security will continue in some form, at least throughout the 75-year period the government looks at when publishing its long-term reports. But we can't say how far it'll go.

Social Security's trust funds are expected to be depleted in less than a decade. That could lead to benefit cuts of more than 22%, depending on what changes Washington makes to the program over the next few years.

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There's no easy fix, but the Brookings Institution has identified one key change that would be painless for most Americans and would save the program more than $730 billion over the next 10 years.

Wealthy Americans can reduce Social Security's deficit by $730 billion over the next decade

Many don't realize it, but the federal government doesn't charge Social Security payroll taxes on all income Americans earn during the year. In 2025, it only levies this tax on the first $176,100 a person earns.

Because of the way this is set up, ordinary Americans typically pay 6.2% (12.4%, split evenly between employee and employer) in Social Security payroll taxes on all of their income; meanwhile, many of the wealthiest Americans only pay the tax on a tiny fraction of their earnings.

The ceiling on income subject to the Social Security tax increases each year, but the difference is relatively small. In 2024, the first $168,600 was subject to tax. This only increased by $7,500 for 2025.

With Social Security fast approaching its insolvency deadline, this low cap has become a target for those who want to keep the program sustainable without hurting ordinary Americans. Raising this ceiling would increase revenue for the program, without changing how much low- to middle-income workers pay into Social Security.

There are different versions of this plan. Some have suggested eliminating the cap, while others have proposed raising it to $400,000. The plan that Brookings looked at involved raising the taxable-maximum ceiling 6 percentage points faster than under the current law, until it covers 90% of total wages. It estimated the program would reach this goal by 2039 if the change took effect in 2027.

An Urban Institute analysis estimated that this change would save Social Security $730.2 billion between 2025 and 2035. But it still falls short of what the program would need to keep itself going for another 75 years.

It will take a lot more to fix Social Security

The latest Social Security Board of Trustees' report listed the 75-year actuarial deficit as being "3.50 percent of taxable payroll." This means that over the next 75 years, the shortfall is expected to equal 3.5% of the total amount of wages that Americans will pay Social Security payroll taxes on. In terms of dollars, the projected shortfall is about $22.6 trillion.

That was before President Joe Biden signed the Social Security Fairness Act, which increases benefits for 3.2 million Americans. The extra spending also increases the projected deficit, which the Brookings report estimates at 3.62% of taxable payroll.

By contrast, the $730.2 billion the government could take in if it raised the ceiling on Social Security payroll taxes would only amount to 0.66% of taxable payroll. So while it would certainly help, other strategies would be necessary to keep Social Security solvent.

Most of the other proposals for fixing the shortfall aren't nearly as popular. One possible idea is raising the Social Security payroll tax rate for everyone. Another is raising the full retirement age (FRA), which would effectively act as a benefit cut for younger workers.

It's unclear what Washington will ultimately do to fix the program. It's likely to involve a combination of strategies, some of which may target workers while others primarily affect retirees. Expect to see this issue receive more and more attention over the next few years.

Once the government decides on a path forward, it'll be time to revisit your retirement plan to see if you need to make any changes.

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