2025 Social Security Trustees Report – Solvency Clock Ticking

The 2025 Social Security Trustees Report was released on June 18, 2025.  The Social Security Act requires the Trustees Report to be issued annually by April 1 of each year, however, that deadline is rarely met.

The Trustees Report provides information on the projected finances of Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds (OASDI when combined) as well as the trust fund for Medicare Part A – Hospital Insurance (HI).

The big headline is this year’s report is that the OASDI trust fund will be depleted in 2034 – one year earlier than previously forecast.  What that means is that the current surplus of funds will be gone, and on-going employment taxes are projected to only provide enough funds to pay 81% of benefits at that time.  

Meanwhile, Medicare’s Hospital Insurance (HI), also known as Medicare Part A, trust fund is forecasted to dry up by 2033.  Note that Parts B and D of Medicare are funded by Medicare Premiums with the base Part B premium likely to go from $185 currently to $206.50 in 2026.

The projections:

• OASI funds full benefits through 2033, then pays ~77%.

• Combined OASDI would pay ~81% at depletion in 2034

• Medicare HI covers full benefits till 2033, then drops to ~89%.

Three main factors have hastened the projected depletion:

1. The Social Security Fairness Act (Jan 5, 2025) boosted benefits for ~3.2 million public-sector retirees.

2. Revised assumptions: slower wage growth, delayed fertility rebound to 2050, and adjusted economic forecasts.

3. Medicare’s unexpected spending surge in 2024 worsened hospital insurance fund projections.

   
   

If Congress does not act then around 2033, social security beneficiaries may face a cut of ~19% and Medicare Part A will only cover ~89% of hospital costs.  There is some debate on if the shortfall would result in across the board benefit cuts or if the government is required to fund the difference via the national general fund (which would result in cuts to other programs and/or significantly increase the national debt and cost of servicing that debt).

Early action is always going to be better than waiting, but Congress has shown no appetite for acting.  Potential adjustments include increasing the taxable earnings cap, gradual benefit adjustments for higher earners, raising benefit ages or benefit tweaks.  Waiting almost certainly increases the severity of required adjustments.

Anyone not yet receiving benefits might want to plan conservatively and consider delaying Social Security benefits (up to age 70) to maximize monthly checks.  Everyone should stay informed and contact their representatives to support reforms that preserve the full, long-term benefits.

Lake Tahoe Wealth Management is here to help you understand the potential impact on your financial future.