Social Security only has nine years left until it becomes insolvent, and in light of the Social Security Fairness Act’s recent passage, that might be too optimistic. The program is staying afloat by draining money from its trust funds, but it can’t do that forever.

Even in the worst-case scenario, benefits won’t disappear completely. But cuts remain a possibility if the government doesn’t find a way to increase the program’s funding. Officials have known about this issue for years, but they haven’t had any luck agreeing on a plan so far.

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Part of the reason for this is the sheer size of the shortfall. While there isn’t much ordinary Americans can do about this, understanding its magnitude and the options for eliminating it can help you prepare for what could be coming.

Social Security is facing a massive shortfall

Social Security began running out of money when the baby boomers started to retire. Their exit from the workforce drastically increased the amount of Social Security benefits the program paid out annually. The generations that followed the boomers are smaller, so there are fewer workers left to pay the payroll taxes that serve as the program’s primary source of funding.

It’s been able to continue paying out benefits so far by relying upon Social Security’s trust fund reserves, but those are running low. A recent Congressional Budget Office (CBO) report indicated the trust funds would be depleted by 2034. Following that, the program would only be able to pay out about 77% of scheduled benefits unless the government increases its funding.

That will be a tall order, though. The latest Trustees Report estimated the shortfall to be $22.6 trillion in 2024’s dollars. That’s about 3.32% of taxable payroll over the next 75 years.

Coming up with that kind of cash will require significant changes to tax law and possibly to Social Security benefits. And someone will have to shoulder the extra cost. Politicians haven’t been able to agree upon a fair solution yet, but you can expect the issue to get more attention over the next decade.

There aren’t any quick fixes

Congressional representatives have floated numerous ways of increasing Social Security’s funding over the years. They run the gamut from raising the program’s full retirement age (FRA), which would act as a benefit cut for younger adults, to raising or eliminating the ceiling on income subject to Social Security payroll taxes. This is a popular proposal among ordinary Americans because it would primarily affect the wealthy, but it wouldn’t be enough to eliminate the shortfall on its own.

Whatever the government decides to do, it will probably need to incorporate more than one strategy if it hopes to avoid Social Security benefit cuts. We don’t know what its final decision will look like, but higher taxes for workers and maybe retirees remain a possibility.

What workers and seniors can do

If you have strong feelings about how the government should handle Social Security’s shortfall, reach out to your Congressional representatives and make your thoughts known. You should also take steps now to improve your future financial security.

If you’re still working, set aside as much money as you can for your future. The larger your nest egg, the better you’ll be able to weather whatever happens with Social Security.

If you’re already claiming benefits, explore ways to diversify your retirement income. This may include taking on a job or renting out property you own. Limit your annual retirement account withdrawals to only what you need and allow the remainder to grow for as long as possible.

Whenever the government decides upon a plan to increase Social Security’s funding, everyone will need to reevaluate their financial plans. You may need to adjust your budget or your planned retirement date at this time.

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