The midterms are crucial to the future of Social Security - no matter how old you are

By Alessandra Malito

The program is expected to run out of money in the next six years, which is the same amount of time as a senator's term

This election will be an important one for Social Security's future.

The dire warnings that Social Security is running out of money have been blaring for so long that they have started to sound like white noise. But the program's day of reckoning is approaching quickly, just as a new Congress is set to be elected.

The candidates elected to the Senate on Nov. 3 - one third of the chamber - will serve a six-year term beginning in January. Social Security's trust funds are expected to run out of money in six years.

With those timelines merging, and the Social Security Administration in dire need of reform, this year's elections are pivotal for the future of the program. The politicians voted in next week, including senators and representatives, may be those deciding the fate of American retirees' finances.

"This election comes at a critical moment for Social Security," said Rebecca Vallas, chief executive officer of the National Academy of Social Insurance, a nonpartisan nonprofit focused on social insurance programs. "The senators elected this November - and likely the president elected in 2028 - will be the leaders who determine what to do about Social Security's financing gap."

Social Security is on the path to insolvency. The program's trust funds are expected to be exhausted by 2032, at which point beneficiaries may see cuts of about 26% to their payments. Congress has never let Social Security falter or skip a benefit, but the federal government hasn't voted on any legislation that would resolve the program's financing issues.

Nearly 69 million people received Social Security benefits in September, according to the Social Security Administration. More than 57 million of them were 65 and older.

Some candidates are talking about Social Security. John Deaton, a Republican candidate for a Senate seat representing Massachusetts, said the program's problems highlight what's wrong with our current political system.

"Social Security is one of the examples of why we have a broken Congress. Everyone knows that in 2032 Social Security will not be able to make the current payments that it is making. They talk about it being bankrupt," Deaton said in an interview. "Whoever gets elected this cycle will have to deal with Social Security."

This isn't the first time Social Security has come dangerously close to insolvency. Legislators waited until the last minute to pass the Social Security Amendments of 1983, a package of provisions to stop the program from running out of money, including increasing its prescribed full retirement age from 65 to 67 through a long and phased process, implementing a tax on up to 50% of Social Security benefits, and delaying the cost-of-living adjustment by six months.

Legislators at the time expected those provisions to keep the program solvent until 2040, former Social Security Administration Commissioner John Svahn told MarketWatch last year. Svahn served as commissioner in the early 1980s, during its financing crisis. "It was recognized at the time that Congress would have to do something in between," he said. "Well, they haven't done it yet."

What's at stake

The Congressional Budget Office, a nonpartisan independent federal agency, released its latest projections in September, saying Social Security could become insolvent by 2032. At that point, Social Security recipients would see a 26% benefit cut. By the end of the century, if lawmakers do nothing to fix the problem, beneficiaries would see a 40% benefit cut.

For the average Social Security recipient, these cuts could represent hundreds of lost dollars. The average monthly benefit for a retired worker in September 2026 was $2,089 a month, meaning a 26% cut would reduce the monthly check by $543, without adjusting for inflation.

These estimates are even more severe than what the Social Security trustees suggested in June. The trustees also expect the money to run out in 2032 but estimated a 22% benefit cut. These cuts would be automatic, and they would hurt many current and future retirees.

At least 13.7% of older Americans rely on Social Security payments for 90% or more of their family income, according to a 2024 Census Bureau's Center for Economic Studies report.

Decades ago, retirement planning was likened to a "three-legged stool": one leg represented a pension, another leg represented Social Security and the last stood for the individual's own personal savings and investments.

Today, that stool is pretty wobbly. Pensions in the private sector have become almost obsolete, and Americans are struggling to cover everyday expenses, let alone save enough money for their old age. Almost half of Americans said they are "deprioritizing" or unable to save for retirement because of current expenses, according to a survey of 1,000 working adults 18 and older by NFP, a company focused on workforce operations. More than four in 10 employees 55 and older said they expect Social Security to be their primary source of income in retirement.

Social Security reform ideas have floated around Congress for decades. Legislators have introduced proposals through the years, and policy-advocacy groups and experts have written blueprints to reverse insolvency.

Common suggestions include eliminating the income-tax cap, raising the full retirement age, implementing new taxation avenues or altering the cost-of-living adjustment in an effort to boost revenue for the program. None of these options on their own would fully fund Social Security's shortfall, but a package of provisions might.

Eliminating the income-tax cap

Workers contribute 6.2% of their earnings to Social Security, and their employers contribute another 6.2% (self-employed individuals contribute the full 12.4%). Workers only pay Social Security taxes on income up to $184,500 this year. Any income that exceeds that cap is not subject to the tax.

One bipartisan proposal would eliminate that cap, so that all earners' income would be taxed for Social Security. Sens. Elizabeth Warren, a Democrat from Massachusetts, and Bernie Moreno, a Republican from Ohio, were the latest to suggest this option to help Social Security's finances, coming together earlier this year to tell Congress to lift the cap.

This proposal would hit higher earners, since nothing would change for those with earnings below the cap. Experts have suggested two ways to treat benefits if lawmakers eliminated the cap: one in which higher earners could later get benefits calculated using what they've contributed through the years and another in which Congress could cap their benefits regardless of how much they pay in tax.

Massachusetts candidate Deaton agreed that increasing the cap is one way to help the program. "It is not the only fix we need, but it is the most commonsense fix," he said.

Raise the retirement age

Another possibility would be to raise Social Security's full retirement age, which is currently 67 for anyone born in or after 1960. The full retirement age, or FRA, is the age at which beneficiaries receive 100% of what they're owed. Some retirees claim retirement benefits sooner - as early as age 62 - but doing so results in a permanent reduction to their monthly payments. Others might delay their benefits, which gives them an additional 8% in payments for every year they delay their FRA between 67 and 70.

Some candidates who ran in the 2024 presidential election floated raising the full retirement age as an option to shore up Social Security's finances, though with the expectation that the FRA would only rise for younger workers who have decades to go until retirement.

Increasing the FRA from 67 to 68 immediately would close the shortfall by 12%, and raising it to 69 would reduce it by 17%. Doing that, however, could derail the retirement planning of millions of Americans, as it could affect those in or near their Social Security-claiming years.

Other possible measures

Experts have also suggested new income streams through taxation, including directing some estate-tax revenue to Social Security, expanding on net investment income taxes and reaching beyond payroll taxes in the workplace.

Most of Social Security's revenue comes from payroll taxes, but the pay-as-you-go system is overworked. The worker-to-beneficiary ratio was 2.7 to 1 in 2023, according to Pew Research Center, far narrower than in 1965, when there were four times as many workers as there were beneficiaries. That ratio is forecast to drop to 2.1 by the end of the century. Wealth inequality has also widened the gap between low and high earners, affecting how many people are taxed on their entire earnings versus those who exceed the income-tax cap. Only about 83% of earnings are covered by the program, compared with 90% in 1983.

Salaries are just one portion of a worker's pay, however. The contributions employers make to their workers' retirement plans and workplace health insurance aren't subject to Social Security taxes, though experts have considered what implementing Social Security taxation on such benefits would do for the program. Applying the payroll tax to employer-sponsored health insurance, for instance, could generate $2.4 trillion over 10 years, according to the Tax Foundation.

Legislators have also considered the impact that taxing net investment income could have on the program. Sen. Bernie Sanders, a Vermont independent, joined Democrat Warren in proposing a bill that included steeper taxes on higher earners' net investment income, which would include dividends, capital gains, rental income and interest. A combination of eliminating the income-tax cap, a new 12.4% tax on net investment income and a new net-investment-income tax on certain businesses could bring the program an additional $33.8 trillion, according to a letter written by Stephen Goss, former chief actuary of Social Security.

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10-29-26 1801ET