Social Security faces a significant funding challenge that will require attention during the next presidential term, according to former Treasury Secretary Jack Lew. Speaking on a financial news program, Lew indicated that the program’s trust fund dedicated to retirement benefits could become exhausted in the fourth quarter of 2032, at which point it would only be able to pay 78% of scheduled benefits. When factoring in the disability trust fund, full benefits could be maintained until the third quarter of 2034, when 83% of scheduled benefits would remain payable, according to projections released by Social Security’s trustees in June.
The program currently serves more than 75 million Americans, including retirees, disabled individuals, and their families. As the population ages and more Americans reach retirement, demand for benefits continues to increase. Government spending on Social Security, Medicare, and Medicaid rose by approximately $198 billion in the first 11 months of the current fiscal year, reflecting higher average benefit payments and increased enrollment. Lew cautioned political candidates to remain flexible regarding potential solutions, noting that delays in addressing the issue will only complicate future reform efforts.
Historical precedent exists for bipartisan action on Social Security. In 1983, major reforms were enacted that included taxation of certain benefits and increases to the retirement age. Lew suggested lawmakers could draw upon that collaborative model. However, he expressed skepticism about proposals to invest trust fund assets in the stock market, citing concerns about government ownership of private enterprises and market volatility. Instead, Lew suggested policymakers should examine the wage base subject to payroll taxes and whether current contribution levels will sustain benefit payments, currently capping wages subject to taxation at $184,500 in 2026.
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