Social Security's Retirement Trust Fund Runs Dry in 2032, AARP Blames Shrinking Tax Base

The program's trustees project the retirement trust fund will exhaust its reserves in the fourth quarter of 2032. After that, incoming payroll taxes would cover only about 78% of scheduled benefits. Combine retirement and disability, and the money runs out in the third quarter of 2034, with enough left to pay roughly 83%. Cheques don't stop — they shrink, unless lawmakers rewrite how the program is funded.

New research from the AARP Public Policy Institute points at the tax base rather than ageing alone. Wages subject to Social Security tax made up 41% of US GDP in 1983; by 2025 that share had slid to 34%, as more income flows through business profits and investments instead of paycheques. AARP calculated that holding the 1983 share would have pulled in an extra $10.8 trillion — enough to pay full benefits until 2059.

AARP floated two levers to close the gap. Raising or scrapping the payroll tax cap could cover up to 67% of the long-term funding shortfall. Taxing some investment income could add another 25%.