The financial future of Social Security beneficiaries is uncertain if the trust fund reserves used to pay them become depleted by 2032.
Beneficiaries shouldn’t have to worry about losing their benefits completely, but there may be cuts to their benefits to keep the Social Security system going.
However, before going into an explanation of what will happen if reserves are depleted, here’s what you need to know about how Social Security is funded.
How is Social Security funded?
Social Security is funded through salary withholdings.
According to the Social Security Administration, employees and employers each pay 6.2%, for a combined 12.4%.
If individuals are self-employed, they pay all of the 12.4%.
In tax year 2026, the tax is applied to the first $184,500 of your income, according to the Social Security Administration.
When you contribute to Social Security, the money isn’t funneled directly into a personal account.
Workers pay into a collective fund that pays for current retirees’ benefits.
For every dollar taken out of a worker’s paycheck, 85 cents goes towards the Social Security trust fund, according to the Social Security Administration.
The remaining 15 cents goes into a separate trust fund that pays benefits to people with disabilities and family members.
The Social Security trust fund is called the Old-Age and Survivors Insurance (OASI) trust fund and the disabilities trust fund is called the Disability Insurance (DI) trust fund.
What happens to Social Security and Disability trust funds if they run out of money?
If Social Security’s trust funds run out by 2032, benefits would not stop — contrary to popular belief.
If nothing else is done and Congress does not act, Social Security could still pay 81% of promised benefits using yearly tax income, according to the Center on Budget and Policy Priorities.
While receiving only a fraction of promised benefits is not ideal, Social Security will not go bankrupt.
