Social Security: Sustainability, Challenges, and Possible Reforms

Steve Lear |

By Chris Johnson, CFP®

This blog post is a follow-up to The Social Security Retirement Benefit – A Key Component of Retirement Planning, written by Chris Johnson, CFP® in August, 2022.  

Social Security is one of the most important social programs in the United States, providing a financial safety net for millions of retirees, disabled individuals, and surviving family members. When helping our clients prepare for retirement, our comprehensive financial planners know that everyone’s situation is different, but one component remains the same – retirement planning always includes Social Security. However, the program is facing significant challenges that threaten its long-term sustainability.


Social Security is funded through payroll taxes, which are paid by employees and employers. At this time, the program's costs are projected to exceed its revenues in the coming decades, primarily due to demographic changes. As the baby boomer generation retires, there will be fewer workers paying into the system and more retirees receiving benefits.

According to the Social Security Trustees' latest report, the combined projection of the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds indicates that the funds will be depleted by 2034, one year earlier than reported last year. At that time, the trust funds will only be able to pay 80 percent of scheduled benefits from continuing program income. While this is a concerning projection, policymakers can make changes to the program to ensure its long-term sustainability.

*OASI and DI are separate trust funds, but the combined projection is frequently used to indicate the overall health status of the Social Security program.


One of the biggest challenges facing Social Security is the United States’ aging population. As more people retire and life expectancies increase, the program will continue to face increased costs. In addition, the program's structure can create disincentives for older workers to stay in the workforce, as some may be reluctant to earn income that could reduce their Social Security benefits.

The aging population has resulted in a decline in the ratio of workers to retirees. In the 1950s, there were over 16 workers paying into the system for each retiree receiving benefits. Today, that ratio has fallen to approximately two workers per retiree. This trend is expected to continue, putting additional pressure on the program's finances.

Possible Reforms

There are several possible reforms that could be made to Social Security to ensure its long-term sustainability. One option is to increase the retirement age. Currently, the full retirement age (FRA) is 67 for those born in 1960 or later. Increasing the retirement age would reduce the number of years that retirees collect benefits and increase the number of years they contribute to the system.

Another potential option is to eliminate the wage base limit applied to employees that pay Social Security taxes. Currently, the wage base limit for 2023 is $160,200. This means that employees only pay Social Security taxes on earnings up to $160,200. By eliminating the limit, revenues to the program would increase significantly.

Similar to the wage base limit, another proposal is to increase the payroll tax rate. Currently, employees and employers each pay a tax of 6.2% on wages up to a certain amount. Increasing the tax rate would increase revenues for the program, but would also reduce the take-home pay of workers.

Lastly, the most difficult and controversial reform option is means-testing. This would involve reducing benefits for high-income individuals or eliminating benefits altogether for those with significant retirement income from other sources. However, this proposal could be seen as inequitable to those who have been paying into the system for years but will not be entitled to receive retirement benefits. Additionally, changes in circumstances could result in the reduction or loss of other income sources that were initially factored into the means-testing evaluation and rendered an individual ineligible for benefits.

Final Thoughts

The future of Social Security is uncertain, but with thoughtful and timely reforms, the program can continue to provide an essential safety net for retirees, disabled individuals, and surviving family members. It is up to policymakers to work together to find solutions that ensure the program's long-term sustainability while also protecting the benefits that Americans rely on.

Navigating Social Security is a complicated, but critical part of the retirement planning process. If you have questions about how your Social Security benefit fits into your comprehensive financial plan, please reach out to your Affiance Financial advisor.

Sources:, “Insurance Planning” 7th edition, James F. Dalton et al.

There can be no assurance that the content made reference to directly or indirectly in this blog post will be suitable for your individual situation, or prove successful. Due to various factors, including changing conditions and/or applicable laws, the content is only reflective of current opinions or positions and is subject to change at any time and without notice. Moreover, you should not assume that any information contained in this blog post serves as the receipt of, or as a substitute for, personalized investment advice from Affiance Financial. Please remember to contact Affiance Financial if there are any changes in your personal/financial situation or investment objectives.