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What Happens When Social Security Runs Out? A Former SSA Deputy Commissioner Weighs the Options

Presenter: Mark J. Warshawsky, Ph.D.
Host: Tom Dickson
Original Air Date: September 23, 2026
Run Time: Approximately 1 Hour, 40 Minutes
Topic Area: Social Security, Retirement Planning, Public Policy

Key Takeaways

• The 2026 Social Security Trustees Report projects that the Old-Age and Survivors Insurance (OASI) Trust Fund will be depleted in the fourth quarter of 2032, at which point continuing program income is projected to cover approximately 78% of scheduled OASI benefits.
• The OASI and Disability Insurance (DI) Trust Funds are legally separate. If considered on a combined basis, the funds are projected to be depleted later than OASI alone.
• Without legislative action, the central question isn't simply whether scheduled benefits could be reduced, but how available revenue would be allocated among beneficiaries.
• A proportional reduction would apply the same percentage reduction across affected benefits, regardless of a beneficiary's other financial resources.
• An alternative proposal developed by Andrew Biggs and Kristin Shapiro would impose a monthly benefit cap, protecting benefits below the cap while producing progressively larger reductions above it.
• Warshawsky presented a different contingency approach based on individual net worth, modeled in part on Australia's means-tested Age Pension system.
• His analysis found that Social Security benefit levels aren't necessarily a reliable proxy for a beneficiary's overall financial resources, because people with relatively high benefits can have modest wealth and people with lower benefits can have substantial assets.
• The session also examined other approaches to Social Security financing, including higher payroll taxes, taxes on investment income, changes to the taxable earnings base, retirement-age changes, general revenue and possible changes to spousal benefits.
• Warshawsky repeatedly emphasized that his asset-based approach is a contingency proposal rather than current law, and that many different policy choices could emerge before Trust Fund depletion.
• For financial advisors, the discussion highlighted the importance of recognizing the uncertainty surrounding future Social Security policy rather than making client planning decisions based on any single proposed solution.

The Social Security Funding Problem Is Getting Closer

Social Security's long-term financing challenges aren't new, but the projected depletion date for the retirement trust fund is becoming increasingly relevant to today's retirement-planning conversations.

Warshawsky focused primarily on the Old-Age and Survivors Insurance Trust Fund, which finances retirement and survivor benefits.

Based on the 2026 Trustees Report discussed during the webinar, the OASI Trust Fund is projected to be depleted in the fourth quarter of 2032. At that point, continuing program income is projected to cover approximately 78% of scheduled OASI benefits.

That distinction is important.

Social Security wouldn't simply “run out of money.” Payroll taxes and other program income would continue flowing into the system. The issue is that, without legislative changes, projected revenue would no longer be sufficient to pay all scheduled OASI benefits.

Warshawsky also distinguished OASI from the Disability Insurance Trust Fund. The two funds are legally separate, although Social Security's financial condition is frequently discussed using combined OASI and DI figures.

Why the Long-Term Outlook Has Worsened

The webinar also examined the demographic forces affecting Social Security's finances.

Warshawsky pointed particularly to declining birth rates and their long-term effect on the number of workers supporting the system.

Social Security is largely financed through payroll taxes paid by today's workers and employers. As the relationship between workers and beneficiaries changes, financing the benefits scheduled under current law becomes increasingly difficult.

The webinar cited a 4.42% of taxable payroll long-range financing shortfall for the combined OASDI program over the 75-year projection period.

Warshawsky used this figure to illustrate the magnitude of the challenge: closing the entire long-term gap exclusively through additional revenue or exclusively through benefit changes would require significant adjustments.

What Happens If Congress Doesn't Act?

Much of the discussion centered on a question that receives less attention than Social Security solvency itself:

If sufficient revenue isn't available to pay all scheduled benefits, how should the available money be allocated?

A commonly discussed outcome is a proportional reduction in which affected beneficiaries receive the same percentage of their scheduled benefit.

Warshawsky questioned whether that would be the most appropriate way to distribute a shortfall.

Under a proportional approach, a beneficiary with relatively few financial resources and a wealthy beneficiary could experience the same percentage reduction.

That led to the central subject of his research: whether other methods of allocating available Social Security revenue should be considered if lawmakers haven't enacted a broader solution before depletion.

Alternative #1: Cap Social Security Benefits

Warshawsky discussed a proposal developed by economist Andrew Biggs and attorney Kristin Shapiro.

Instead of applying the same percentage reduction to everyone, their approach would establish a maximum monthly Social Security benefit.

In the version discussed during the webinar, benefits below the threshold would remain unchanged, while beneficiaries above the threshold would experience progressively larger reductions.

Warshawsky identified several advantages to this approach.

It would be relatively straightforward to administer, easy to communicate and would generally protect beneficiaries receiving lower Social Security benefits.

But he also identified an important limitation:

The amount someone receives from Social Security doesn't necessarily tell you how financially secure that person is.

Social Security Benefits Aren't the Same as Wealth

One of the more interesting findings presented during the webinar came from Warshawsky's analysis of data from the Health and Retirement Study.

He found substantial variation between Social Security benefit levels and overall financial resources.

Some retirees receiving relatively high Social Security benefits had comparatively modest net worth.

Conversely, some people receiving relatively small Social Security benefits had considerable wealth.

There are many reasons this can happen.

Someone may have spent fewer years in covered employment, receive a spousal benefit, retire early, own substantial real estate or business interests, or accumulate significant retirement and investment assets outside Social Security.

For Warshawsky, this creates a weakness in using Social Security benefit levels alone as a proxy for someone's ability to absorb a reduction.

Alternative #2: An Asset-Based Means Test

Warshawsky then presented his own alternative.

Rather than determining reductions according to the size of someone's Social Security benefit, his model would look at the beneficiary's individual net worth.

The proposal was influenced by Australia's means-tested Age Pension system.

In the model presented during the webinar, the test would initially focus on beneficiaries between ages 62 and 74 and wouldn't apply to disability benefits or child survivor benefits.

The analysis used an individual net-worth calculation that included:

• Housing wealth.
• Retirement accounts.
• Other financial assets.
• Business assets.
• The actuarial value of defined-benefit pensions.
• Debt, which would reduce calculated net worth.

Under the model Warshawsky presented, individuals within the targeted age range with net worth below approximately $470,000 would continue receiving their full benefit.

Benefits would then be gradually reduced as net worth increased, with the phaseout reaching approximately $785,400.

These thresholds were part of Warshawsky's analytical model—not existing Social Security rules.

What Would the Asset Test Mean for Beneficiaries?

Using the Health and Retirement Study data, Warshawsky estimated that within the population targeted by his model:

• Approximately 45% would continue receiving full benefits.
• About 16% would receive partially reduced benefits.
• Approximately 40% would receive no Social Security benefit during the applicable age range.

His modeling indicated that the approach could initially produce enough savings to address the projected shortfall around the time of OASI Trust Fund depletion.

Warshawsky was also candid about the proposal's limitations.

Determining individual net worth for millions of beneficiaries would create significant administrative complexity. It could also influence how individuals save, borrow, hold assets or structure their finances.

He repeatedly characterized the approach as a contingency or stopgap, rather than the type of comprehensive Social Security reform he would have preferred years earlier.

Why Australia Entered the Conversation

Australia provided an important comparison during the presentation.

Its retirement system includes an Age Pension that is subject to means testing, alongside its compulsory retirement savings system.

Warshawsky didn't suggest that the United States could simply copy Australia's retirement system.

Instead, he used the Australian experience to demonstrate that a national retirement benefit can incorporate income and asset testing.

His proposal adapted aspects of Australia's asset test to explore what a similar mechanism might look like if applied to Social Security benefits in the United States.

Could Higher Taxes Solve the Problem Instead?

Benefit reductions and means testing represent only one side of the Social Security debate.

The other major possibility is increasing revenue.

The webinar examined a previously introduced proposal that included imposing Social Security payroll taxes on earnings above $400,000 and adding taxes on certain investment income for higher-income households.

Warshawsky discussed earlier actuarial estimates of that approach and compared them with the larger financing shortfall reflected in the 2026 Trustees Report.

His broader point was that the financing challenge has grown large enough that advisors and policymakers need to consider the tradeoffs associated with both sides of the equation:

Who receives benefits, how much they receive, who pays additional taxes, and how those changes could affect work, saving and investment decisions.

What About Raising the Retirement Age?

During the Q&A, an attendee asked whether increasing the retirement age could help address Social Security's financing problems.

Warshawsky noted an important economic reality:

Increasing the retirement age is effectively a form of benefit reduction.

Someone who must wait longer to receive an unreduced benefit—or receives a lower benefit at a given claiming age—is experiencing a change in the value of the benefit.

Earlier reforms might have been able to rely on relatively modest combinations of retirement-age changes and additional revenue, he explained. With the financing gap now larger, he expressed the view that those changes alone may no longer be sufficient.

Could Social Security Eventually Use General Revenue?

Another possibility discussed during the Q&A was funding Social Security more directly through general federal revenues rather than relying primarily on its traditional dedicated financing structure.

Warshawsky noted that such an approach would represent a significant change in the program.

It could also reopen a much broader policy discussion about whether Social Security should continue functioning primarily as a contributory social-insurance program or move toward a system in which benefits are more explicitly tied to financial need.

The webinar didn't attempt to resolve that question, but it demonstrated how dramatically the Social Security debate could change as the projected depletion date approaches.

Spousal Benefits Could Also Become Part of the Debate

The Q&A also explored whether future reform could include changes to Social Security's spousal-benefit structure.

Warshawsky noted that the current structure was developed in a very different labor environment, when households were more likely to have one primary wage earner and one spouse who didn't participate extensively in paid employment.

Changes to spousal benefits could therefore become another component of a broader reform discussion.

As with the other alternatives discussed during the program, no specific change presented in this portion of the discussion should be interpreted as current law.

Should Clients Claim Social Security Earlier Because of the Uncertainty?

This was one of the most practical questions raised during the webinar.

If an advisor believes Social Security benefits could eventually be reduced or means-tested, should a wealthy client claim benefits earlier to collect as much as possible before something changes?

Warshawsky cautioned against making planning decisions based too heavily on a specific proposal that hasn't been enacted.

He explicitly acknowledged that his asset-based approach hasn't been introduced in Congress and that many other outcomes are possible.

That makes the distinction between scenario planning and prediction especially important.

Advisors can model potential changes to Social Security. But changing a client's claiming strategy today based on one hypothetical future policy could create unintended consequences if Congress ultimately chooses a very different solution.

Questions From Attendees

The extended Q&A addressed several additional issues, including:

• Whether increased immigration could improve Social Security's finances by expanding the workforce.
• Whether eliminating or increasing the taxable wage cap could materially improve solvency.
• How raising the retirement age affects lifetime benefits.
• Whether general tax revenue could eventually be used to finance Social Security.
• How liabilities would be treated under an asset-based test.
• Whether an asset test could encourage beneficiaries to restructure their wealth.
• How home equity might be treated when housing costs and property values vary significantly across the country.
• How married couples and spousal benefits might be affected under different benefit-reduction approaches.
• Whether defined-benefit pensions should be included when measuring net worth.
• How advisors should incorporate Social Security uncertainty into long-term financial plans.

The discussion reinforced how many variables would have to be addressed in any significant Social Security reform.

Practical Application for Financial Advisors

The webinar didn't provide advisors with a new Social Security claiming formula.

Instead, it provided something potentially more useful: a framework for thinking about policy uncertainty.

For advisors working with clients approaching or already in retirement, several planning considerations emerge:

Avoid treating scheduled benefits as completely certain. Advisors may want to stress-test retirement plans using different Social Security assumptions, particularly for younger clients and those whose plans depend heavily on Social Security income.

Separate current law from proposals. Benefit caps, asset tests, new taxes and other reforms discussed during the webinar remain potential policy approaches unless and until legislation is enacted.

Don't make claiming decisions based on a single hypothetical reform. The eventual policy response remains uncertain, and a decision to claim earlier can have lasting consequences.

Consider the client's entire retirement picture. Social Security is only one component of retirement income. Pensions, retirement accounts, taxable assets, housing wealth, longevity, taxes and spending needs should all be considered together.

Revisit assumptions regularly. As the projected OASI depletion date approaches, legislative proposals and Social Security projections may change. Retirement plans should be updated as better information becomes available.

The Bottom Line

The webinar's central message wasn't that Social Security benefits will disappear.

It was that the program faces a significant financing challenge, and the consequences of Trust Fund depletion depend heavily on how policymakers ultimately choose to address the shortfall.

The 2026 Trustees Report projects OASI Trust Fund depletion in the fourth quarter of 2032, when continuing income is projected to cover approximately 78% of scheduled OASI benefits.

What happens between now and then remains uncertain.

Congress could change taxes, modify benefits, adjust retirement ages, alter the taxable earnings base, use other revenue sources, introduce some form of means testing, combine multiple approaches—or pursue another solution entirely.

For financial advisors, that uncertainty makes scenario planning increasingly important.

Rather than trying to predict precisely what Congress will do, advisors can help clients build retirement plans capable of adapting to more than one Social Security outcome.

Continuing Education

The webinar was approved for 1.5 CFP® CE credits and 1.5 IAR Products & Practices CE credits for eligible attendees who satisfied the applicable attendance and reporting requirements.

Compliance Note

This summary is intended for educational purposes and reflects topics, research, proposals and opinions discussed during the webinar. Policy alternatives described by the presenter—including benefit caps and asset-based means testing—should not be interpreted as current law or as predictions of future congressional action. Financial professionals should consult current Social Security Administration guidance and other authoritative sources when advising clients.