But this lifeline is fraying. Since 2021, the Social Security Administration has been paying out more than it collects in taxes. Trust reserves are being depleted, and projections show that without reform, the reserves could run out by the mid-2030s. When that happens, Social Security would only be able to pay about 75% of scheduled benefits using incoming payroll taxes alone.

So, what’s being done about it?

The Political “Third Rail”

Social Security reform is often called the “third rail” of American politics—touch it and risk political fallout. Despite warnings from trustees and economists, major changes haven’t been made since the 1980s, when modest reforms helped delay the crisis. Today’s lawmakers face a similar challenge: how to fix Social Security without upsetting the voting public.

Options like raising the retirement age, increasing payroll taxes, or cutting benefits are all on the table—but none are politically easy. Any real solution will likely require a combination of these approaches, paired with creative new ideas.

Trump’s Plan: Relief Now, Questions Later

Former President Donald Trump has proposed eliminating taxes on Social Security benefits for seniors. That could put an extra $560 per year back into retirees’ pockets—a welcome relief during inflationary times. However, that move could cost the program $1.5 to $2 trillion in lost revenue by 2035.

He’s also floated the idea of exempting tips and overtime from federal taxes. While that may help workers now, it would reduce Social Security’s future funding by cutting payroll tax inflows.

According to the Committee for a Responsible Federal Budget, these proposals could push the trust fund’s insolvency date up to 2032—just seven years away. If that happens, benefits could be cut by as much as 33%.

Can Oil and Gas Revenues Save Social Security?

Trump has also suggested using oil and gas reserves as an alternative funding source. While that might sound promising, current government leasing revenues from fossil fuels would only cover about 4% of the Social Security funding gap. Even with booming production, the math doesn’t quite work out.

Economic growth could offer another boost. A stronger economy creates more jobs, which means more payroll taxes flowing into the system. But that alone isn’t a guaranteed fix. Significant legislative and budgetary changes would still be required to make any real impact.

The Bigger Picture: Social Security’s Place in the Budget

Social Security and Medicare together account for 35% of the federal budget. Social Security alone makes up 21.1%—and it’s funded mostly through payroll taxes (91.3%), taxes on benefits (3.8%), and interest income (4.9%).

One frequently discussed solution is lifting the income cap on payroll taxes. Currently, income above $176,100 isn’t subject to Social Security tax. Raising or removing that cap could bring in billions in additional funding, though it would face resistance from higher earners.

What’s at Stake

Eliminating taxes on Social Security benefits might provide short-term relief, but it risks deepening the program’s long-term problems. As costs rise and life expectancies increase, Social Security must adapt to serve future generations. But doing so will require tough choices and political courage.

The question remains: will lawmakers act before it’s too late?

All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.

The post Can Social Security Survive? Funding Challenges and Trump’s Proposed Reforms appeared first on ROI TV.

How Is Social Security Funded?

Social Security is primarily funded through payroll taxes. If you’ve ever looked at your paycheck stub and wondered where that 6.2% deduction goes, that’s it—it’s your contribution to Social Security. Your employer matches that amount, so a total of 12.4% of your wages (up to $176,100 in 2025) goes into the system. If you’re self-employed, you pay the full 12.4% yourself.

These taxes fall under the Federal Insurance Contributions Act (FICA), and while FICA also includes Medicare contributions, I’m going to focus specifically on the Social Security part for this discussion.

It’s important to understand that Social Security operates on a pay-as-you-go system. That means the taxes being deducted from your paycheck right now aren’t being saved in an account with your name on it. Instead, they’re funding the benefits of current retirees.

Where Does the Money Go? Trust Funds Explained

There are two trust funds that handle these payments:

• Old Age Survivors Insurance (OASI) Trust Fund, which supports retirees, their families, and survivors of deceased workers
• Disability Insurance (DI) Trust Fund, which supports disabled workers and their families

Payroll taxes feed into these trust funds, and they’re also supplemented by taxes on Social Security benefits. Yes—up to 85% of your Social Security benefit can be taxable if you have other sources of income. The taxes on the first 50% of benefits go right back into Social Security, and the remaining 35% is used for Medicare.

Social Security Investments: Where the Surplus Goes

When there’s a surplus in these trust funds, it doesn’t just sit there. It’s invested in special U.S. Treasury securities. These investments are considered risk-free and earn interest, which is added back into the trust funds. That interest is paid twice a year—on June 30 and December 31—and in smaller amounts throughout the year when bonds are redeemed.

Some critics argue that this allows the government to “borrow” from Social Security to fund other programs. While that’s technically true, it’s important to note that these bonds are guaranteed by the U.S. government and earn interest for Social Security.

The Real Challenge: Demographics

The biggest challenge isn’t fraud or mismanagement—it’s demographics. With more people retiring and fewer workers paying into the system, we’re approaching a tipping point. By the mid-2030s, the trust funds are projected to be depleted. That doesn’t mean Social Security will vanish—it just means incoming payroll taxes will only be able to cover about 75-80% of promised benefits.

To fix this, Congress could take a number of steps: raise payroll tax rates, lift the income cap, adjust the full retirement age, or find alternative revenue streams. None of these solutions are painless, but something will need to change.

Is Social Security Efficient?

Actually, yes. Administrative costs are impressively low—about 0.7% of total program spending. In 2023, Social Security paid out $1.35 trillion in benefits, accounting for roughly 22% of the federal budget. However, that year it ran a $41 billion deficit, drawing down its reserves.

When we look closer, about 68% of Old Age Survivors Insurance benefits go to retired workers. The rest supports spouses, widows, and other family members. For the Disability Trust Fund, 94% of benefits go directly to disabled workers.

Misconceptions About Social Security

Let’s address one of the biggest myths: that the government has “raided” Social Security. While the system does invest in Treasury bonds (which can be viewed as a type of borrowing), that money earns interest and stays within the program.

Another myth? That Social Security is “going broke.” That’s misleading. Yes, the trust fund reserves are expected to run out, but payroll taxes will continue to fund a significant portion of benefits—unless Congress steps in to shore things up.

What We Can Do Now

I truly believe that understanding how Social Security works is the first step in securing your retirement. Whether you’re just starting your career or approaching retirement age, knowing what to expect can help you plan smarter and make informed decisions.

If you haven’t already, I recommend creating an account at ssa.gov to get a personalized estimate of your benefits. It’s one of the best tools available for retirement planning.

And finally, let’s keep this conversation going. What do you think? Should payroll taxes be increased? Should the income cap be lifted? I’d love to hear your thoughts in the comments.

All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.

The post Truths and Myths About Social Security appeared first on ROI TV.