Scaling the OBBBA’s Effect on Social Security’s Fiscal Health

Last Thursday marked 90 years since President Franklin D. Roosevelt signed the Social Security Act into law, establishing a retirement benefits program for older Americans. But some aren’t celebrating the milestone—they are too busy fretting it won’t make another nine decades paying full benefits, with fears perking anew based on provisions in the One Big Beautiful Bill Act (OBBBA). But scale and context show why we think these are simply reheated false fears—not some major negative investors and beneficiaries need to sweat.

The bulk of these worries are tied to a letter Social Security Chief Actuary Karen Glenn sent in response to an inquiry from Senate Finance Committee Ranking Member Ron Wyden (D-OR) on August 5, which drew some headlines. Wyden asked how the OBBBA would affect Social Security’s trust funds, “directly and indirectly.” Now, the motivation here very likely falls into the category of partisan politics, which we won’t wade into. But Glenn’s response garnered quite a bit of attention.

In a just-the-facts style, Glenn suggested the bill’s permanently lower tax rates and temporary enhanced standard deduction for seniors will increase net costs (via lower tax revenues) to OASDI (Old‑Age, Survivors and Disability Insurance) trust funds by around $168.6 billion over the next decade. Thus, the estimate generating headlines: Glenn projected this will shift the funds’ insolvency point (when reserves are depleted and incoming revenue won’t fully cover scheduled benefits) from Q3 2034 to Q1 2034. At this point, Social Security would be able to pay 76% of scheduled benefits.^[i]

Perhaps this sounds scary, but scaling these changes helps show why these fears are false. First and foremost, the OBBBA didn’t affect most Social Security funding. Payroll taxes contribute the majority—over 91% in 2024. The OBBBA didn’t change the income ceiling on taxable wages or the rates, so the OASDI will still receive all these projected revenues.^[ii] Interest from trust fund reserves, another (albeit much smaller) funding source, was similarly unaffected.

The OBBBA tweaked only the taxation of Social Security benefits, allowing retirees aged 65 and over to claim a higher deduction—$6,000 for singles (up to $75,000 income) and $12,000 for couples (up to $150,000 income)—until 2028. But this source contributes only around 4% of OASDI’s revenues, anyway.^[iii] It is a tiny slice.

Moreover, the projected net cost increase is spread over a decade, averaging around $17 billion per year. That is just about 0.625% of the OASDI’s $2.72 trillion in reserves—a tiny change not worth fussing over, in our view.^[iv] Glenn’s letter basically confirms this by speeding up the projected trust fund depletion by a whopping two quarters. This is basically just a small adjustment to the straight-line math underpinning the previously existing estimates.

To us, this highlights the folly of long-term forecasts, which are rarely accurate and swing often on unforeseen changes. Social Security’s estimated insolvency point is a constantly moving goalpost. Consider: In 2021, the government predicted funds would dry up in 2033.^[v] The next year, they pushed it back to 2034.^[vi] The next year, 2035.^[vii] Then back to 2034 last year.^[viii] And this year, they moved it up within 2034.

These forecasts are highly imprecise—no one can know exactly how economic activity and wage growth will look over that span, and both are key inputs to any assessment. Projections also presume Congress won’t act if needed to extend the program’s solvency, which isn’t a safe assumption. For example, the 1982 Trustees’ report suggested that “without corrective legislation in the very near future,” OASDI funds would dry up by July 1983.^[ix] While Congress didn’t act until that April, they eventually did, with changes including raising the combined employee and employer tax rates from 13.4% to 15.3% and gradually lifting the retirement age for full benefits to 67—effectively raising tax revenues and kicking the insolvency can a few decades down the road.

Congress has already proven its willingness to adapt and keep Social Security benefits flowing in full, and we doubt this changes. Failing to do so would likely be extremely unpopular among voters, especially when something as simple as marginal payroll tax hikes, delaying the retirement age or changing the benefits formula could swiftly and substantially push back the insolvency date. Congress could also structure it in a way that wouldn’t affect current beneficiaries materially.

Thus, in concert, these seem like reheated Social Security fears—with a side of politics. Setting the latter aside, as we are always agnostic on such things and stocks don’t care about party or personality, scale and context show this isn’t a massive upcoming negative for current or future beneficiaries. Just a small tweak getting far too much attention, in our view.