Takeaways
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Social Security is a vital source of income for millions of Americans, especially seniors, but the system faces insolvency by the mid-2030s, potentially leading to benefit cuts.
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There is an ongoing debate about privatizing Social Security, with some advocating for individual ownership and market-based approaches, while others support maintaining its current structure.
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Despite strong public support for Social Security, recent political developments are raising concerns about potential changes to the program, including privatization or benefit reductions.
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Seniors are advised to engage in proactive retirement planning to mitigate potential risks to Social Security benefits.
The bedrock of retirement income for tens of millions of Americans, Social Security has served as a safety net for nearly 100 years and is the nation’s largest — and among its most popular — public programs.
As the Trump administration works to slash federal government spending and Social Security insolvency looms, some have suggested that privatization should be on the table. But would they dare to touch this proverbial “third rail” of politics?
Social Security Faces Insolvency
Roughly 70 million Americans, including 52 million retirees and 7 million disabled workers, receive Social Security benefits in 2025.
Although benefits are modest — the average payment for a retired worker is around $1,980 per month — many older Americans rely on Social Security as their sole or primary source of income in retirement.
- A 2024 survey found that 27 percent of seniors receive their entire income from Social Security, while 20 percent rely on the program for between 76 percent and 99 percent of their income.
- Research from the Social Security Administration (SSA) found that about half of Americans aged 65 or older receive at least half of their income from Social Security benefits and 25 percent rely on these benefits for at least 90 percent of their income.
According to the SSA, Social Security benefits are particularly vital for households in the bottom half of the income distribution. Nearly nine out of 10 individuals over the age of 65 receive benefits, representing about 30 percent of this group’s total income. But for seniors at the bottom of the income distribution, Social Security accounts for over 80 percent of their total yearly income.
Established in 1935 to address the problem of economic security for the elderly, Social Security is arguably more important than ever. In 1940, the life expectancy of a 65-year-old was almost 14 years; today, it is over 20 years. By 2035, the number of Americans 65 and older will increase from about 61 million to about 77 million.
Twenty percent of Americans ages 50+ have no retirement savings, and more than half are worried they won’t have enough money when they retire, according to AARP, which says that Americans are facing a “retirement crisis.”
This retirement planning crisis is exacerbated by a second, related crisis: Social Security’s looming insolvency. Social Security trust funds are projected to be depleted as early as 2033.
Driven by an aging population and a declining worker-to-beneficiary ratio, the pending shortfall would force across-the-board benefit cuts of about 20 percent for all current and future beneficiaries unless lawmakers come up with a solution, such as raising taxes, reducing benefits, or privatizing the system.
Americans United Behind Social Security
President Trump has proposed eliminating taxes on Social Security benefits, but to date, his administration has given no clear indication that it will try to cut benefits or “do anything that will jeopardize or hurt Social Security” he said in March 2024.
The White House reaffirmed this position in a March 2025 statement. To the contrary, the president has said that the program will be “strengthened,” although he hasn’t provided details about what this would look like.
Still, his administration’s focus on eliminating what it calls “waste, fraud, and abuse” from Social Security and other federal programs has some wondering whether a major shakeup may nonetheless be coming to the largest program in the federal budget.
Social Security makes up nearly one-fifth of total federal spending and pays out an estimated $1.6 trillion in annual benefits. Elon Musk, who heads the Department of Government Efficiency (DOGE) tasked with cutting federal spending, has taken frequent jabs at the program. In recent interviews, he called Social Security the “biggest Ponzi scheme of all time” and suggested that it could be on the chopping block.
Some are interpreting such language as more than idle talk as the SSA undergoes cost-cutting “organizational restructuring” measures.
Critics, including Senators Bernie Sanders (I-VT) and Ron Wyden (D-OR), argue that such actions are sabotaging the system’s functionality. In response to Musk’s “Ponzi scheme” comment, Sanders called DOGE’s spending cuts “a prelude not only to cutting benefits, but to privatizing Social Security itself.” Wyden also referred to SSA reforms as a “prelude to privatization.”
Musk is not the only prominent person whose comments have raised eyebrows about the future of Social Security. In reference to the program’s projected depletion, Sen. John Curtis (R-UT) told NBC: “We’re not being honest when we look people in the eye and say we’re not going to touch it.” He also said that he would “introduce a change to Social Security in the coming months.”
Black Rock CEO Larry Fink, a lifelong Democrat, said in March 2025 that he supports more individual ownership in Social Security, but stopped short of using the term “privatizing.”
Social Security has long been considered the “third rail” of U.S. politics because so many Americans rely on the program and touching it is therefore politically dangerous.
Polls over the years have consistently shown strong, bipartisan support for Social Security. A 2024 survey from the National Academy of Social Insurance (NASI), for example, revealed that 85 percent of Americans said benefit levels should be maintained or increased, even if it means paying higher taxes. More than 80 percent said that benefits are “important” or “very important” to their retirement income.
The CEO of NASI said that “Americans are united in what they want to see for the future of Social Security, and they are united in wanting to see their lawmakers bring revenues into the system to close the financing gap.”
The Ongoing Privatization Debate
Social Security insolvency — and the privatization solution — are part of a debate about the program’s future that dates to the 1980s and has roots in the program’s founding.
During the 1930s, some conservative economists and business leaders criticized the government’s role in retirement savings, favoring private contributions over a public system. These voices were marginal then, drowned out by the urgent need to provide a guaranteed income stream to prevent poverty in old age during the Great Depression.
Post-World War II, thinkers like Milton Friedman began advocating for individual responsibility over collective programs. Friedman’s 1962 book Capitalism and Freedom suggested that private markets could better serve retirement needs.
The 1970s and 1980s marked a turning point. Rising inflation and an aging population strained the system and prompted the first serious privatization talks. In 1981, President Ronald Reagan floated the idea of optional private accounts. Fierce opposition from Democrats and seniors’ groups quashed it. The 1983 Social Security reforms opted instead for adjustments like raising the retirement age and increasing payroll taxes.
Privatization went from a fringe theory to a mainstream policy option in the 1990s amid baby boomers nearing retirement and growing concerns about Social Security’s long-term solvency. In 1997, the Advisory Council on Social Security issued a report with three proposals, two of which involved individual accounts — one publicly managed, the other fully private.
The most ambitious privatization push came under President George W. Bush in 2005. Bush made Social Security reform a centerpiece of his agenda, proposing that workers under 55 could divert up to 4 percent of their payroll taxes into private accounts. He framed it as “ownership society” and promised higher returns through market investments. His plan faced strong resistance and the proposal died in Congress.
Bush’s failure underscored the idea that Americans value Social Security’s guaranteed income structure over the promise of higher, riskier returns — something that Fink alluded to when he said that, had Bush’s effort been successful, Americans, based on the returns of the S&P 500 index since then, would have seen their retirement money increase fourfold.
However, privatizing Social Security would open it up to market volatility — a threat that seems very real with the world economy teetering on recession in 2025 and the 2008 and COVID-era downturns still fresh in the minds of many Americans.
Younger workers might gain from a market-based approach, but those nearing retirement may not have enough time to recover from significant losses. Erosion of the safety net and Social Security’s built-in inflation protection from annual cost-of-living increases are particularly sensitive topics to the many low-income seniors who rely on monthly benefits.
Planning for Social Security Privatization
Of all the developments and rumors coming out of the early days of a second Trump term — from an escalating trade war to federal workforce layoffs — the potential privatization of Social Security may resonate the strongest with seniors.
While “third rail” status, historical precedent, and strong public support for the program make Social Security privatization unlikely, the program must be fixed before it reaches the fiscal cliff. Even if Social Security retains its public structure, benefit reductions are another possibility facing current and future retirees. And while the privatization debate remains largely the same, there’s a chance that this time, the outcome will be different.
Seniors who depend on Social Security can’t risk this chance. For them, proactive planning — such as maximizing other retirement savings, considering long-term care insurance, exploring alternative income streams like annuities, having an estate plan that can adapt to financial change, and seeking professional advice about questions like when to take Social Security retirement benefits — is a must.
