Top fixes for Social Security: How you can get your benefits and protect yourself

The Social Security system will begin to run out of money to pay full benefits in 2033, and it’s estimated that, if no fix is made, benefits would need to be cut by about 20 percent to match the annual inflows into the plan. With no clear plan in place and Washington full of gridlock, the cost of a solution continues to rise over time — helping those who want to cut Social Security benefits. 

But the situation is not hopeless, if the political will can be created to fix Social Security. Many solutions are available that could shore up the program for decades and reduce the retirement insecurity that many Americans feel around their own savings and Social Security’s finances.

“There’s a short-term attitude among our politicians,” says James B. Lockhart III, former principal deputy commissioner and COO of the Social Security Administration. “People are just not willing to take a long-term view.” But Lockhart is hopeful that “people can start talking” and solve it. 

3 big ways to solve Social Security’s challenges

The key issue is that Social Security is paying out more in benefits than it receives in revenue. It can do this because it has a trust fund build up over decades. The situation is much like pouring water into a bucket with a too-large hole in it: water goes in the top but leaks out faster. Around 2033, the bucket will be exhausted and only what goes in each year can come out. 

For decades, Social Security increased the size of its trust fund, taking in more money than it paid out in benefits. As of December 2024, the trust fund has about $2.7 trillion, and the money is invested in U.S. Treasury securities. While money comes into the bucket from taxes, it’s paid out immediately to current beneficiaries, and the trust fund continues to dwindle over time. 

All potential solutions to the Social Security crisis fall into one of three areas: raise revenue, lower payouts or some combination of the two. Let’s break down a few of these ways.

1. Raise revenue

Social Security raises revenue through a dedicated tax on employees and employers, evenly splitting the cost of 12.4 percent — so 6.2 percent each — of the employee’s income, up to $176,100 (in 2025). Earnings above this amount are not taxed, though the limit rises each year.

To raise more revenue, Social Security can take some of the following steps:

Revenue could be raised in other ways, but they’re less impactful, such as taxing newly hired government employees and levying other employer-sponsored “cafeteria” benefit plans. Plus, Social Security benefits themselves could be subject to full taxation, whereas now they may be partially taxable or fully untaxed, with some beneficiaries receiving tax-free Social Security.

Lockhart points out that President Donald Trump’s plan to eliminate taxes on tips worsens the funding situation at Social Security. Similarly, Lockhart says that Trump’s plan to eliminate taxes on Social Security income altogether would even more quickly reduce the trust fund.

2. Lower payouts

Social Security paid out about $1.47 trillion in benefits in calendar year 2024, with administrative expenses of just $7.4 billion. That translates into an average monthly benefit of $1,783.55 as of August 2024, though retirement benefits were higher. 

The program allows beneficiaries to claim their benefit as early as age 62, though they’ll receive less than their full benefit amount. Or they can retire at their full retirement age and receive the full benefit or even wait as late as age 70 and receive a substantially increased benefit. While the best age to take Social Security is subject to debate, the program was designed to pay out the same amount to recipients over their expected lifetime, regardless of the age they filed.

To lower payouts, Social Security can take the following steps:

Payouts could be lowered in other ways, though they will definitely have to be cut substantially if no solution is implemented. So those policymakers who intend to cut benefits can play the long game or even simply try to foul up a negotiated solution in order to get their way. 

And finally, cutting the Social Security workforce, as is currently happening under the Elon Musk-led Department of Government Efficiency, does virtually nothing to solve the funding problem. Social Security’s administrative overhead in 2024 amounts to around 0.5 percent of the total amount paid out. You could cut the whole workforce and save just $7.4 billion annually. 

3. A combination of more revenue and lower payouts

Finally, a solution to the Social Security funding crisis could involve both measures to increase revenue and lower projected payouts. A combo will be the most likely path forward for the hugely popular benefits program, which almost certainly requires a bipartisan solution.

Lockhart sums up the battle lines in broad strokes: “The Republicans don’t want a tax increase, and the Democrats want to raise taxes. The Republicans don’t want to increase benefits, and the Democrats want to increase benefits.”

Somehow those sides will need to come together to find a solution — or benefits will be cut.

Which Social Security solutions are most impactful?

While the potential fixes above make progress, they’re not all equally impactful. Some steps improve the situation dramatically, while others do almost nothing to mitigate the funding issue. So how impactful are the solutions mentioned above? The Peter G. Peterson Foundation scored some of the major proposals and their impact on Social Security’s funding gap.

How much the following proposals narrow the Social Security funding gap

Source: Peter G. Peterson Foundation

Now, the scoring here relies on specific proposals, which have not been explained fully here, but these numbers give some idea of how impactful each proposal would be in closing the gap. For example, simply eliminating the cap on Social Security taxes — limited to income below $176,100 in 2025 — would by itself close 53 percent of the funding gap. 

On the spending proposals, increasing benefits at the lower rate of price growth could cover a huge 85 percent of the funding gap, but at the cost of beneficiaries’ lower purchasing power over time. Highly touted solutions such as raising the full retirement age are less impactful. 

But, as they say, the devil is in the details, and it’s important to understand the key details of each proposal to see whether it’s politically viable. In the end, policymakers will likely take “a little from Column A and a little from Column B” when they decide to address the funding gap. 

How can you prepare if Social Security benefits are cut?

Regardless of how Congress acts — which you can impact by contacting your representatives — individuals can take steps to replace any potentially lost income. And with years to go before any potential benefit cut, you have a lot of time to reduce or eliminate the impact of a cut.

1. Save more

The core to any strategy is saving more, because you’ll need more money in the future. Whether you decide to keep this money tucked away in a top high-yield savings account or invest it for potentially higher returns, you’ll need money to make money.

2. Invest in dividend stocks

Dividend stocks can offer cash income on a regular basis, helping you offset any cut to Social Security. The best dividend stocks raise their payouts each year, giving you more income over time. If you don’t want the hassle of buying individual stocks, then check out the best dividend stock ETFs, which let you buy dozens of companies in one fund. An ETF can provide a safer, diversified way to invest in stocks, making investing more accessible for beginners.

3. Consider annuities

An annuity can offer lifetime income, giving retirees income security and the possibility of never running out of income in retirement. That’s a significant benefit, but annuities also have several drawbacks, including high fees and the tremendous complexity of annuity contracts. If this path sounds interesting, you’ll need to carefully study the best way to buy an annuity, however.

Bottom line

Social Security is poised to run out of money to pay full benefits in the not-too-distant future, and while potential solutions exist, they must be implemented or the program will cut benefits. If you’re concerned about that prospect, you should begin taking action today to minimize the impact on your financial future.