Should We Be Worried About Social Security/CPP Running Out Of Money? - June 12, 2026

Some People Really Need It, Others Don’t

The trustees of the US federal Social Security fund recently released a report that concluded that if the US government doesn’t act soon, the Social Security program will be unable to pay the full amount of existing entitled pension benefits to retirees, as early as 2032…six years from now. If the matter is not dealt with by the current government, this issue will be front and centre for the next US Administration.  

This news was reported on by both Paul Krugman (a former business reporter with the New York Times) and Andrew Ross Sorkin (currently a business reporter with the New York Times and CNBC), both of whom I read regularly; when both of them report on a topic in the same day, it gets my attention.  With this news, I decided to explore the issue facing the US, and learn what shape the Canadian-equivalent program, the Canada Pension Plan, or “CPP”, was in.  

United States Issue

The Social Security program pays benefits annually to approximately 70 million Americans; these benefit payments total $1.4 trillion per year. It's a big number, and this program represents approximately 21% of the entire federal budget.  Despite this, Paul Krugman claims there isn’t a financial crisis lurking in the United States, but rather a political one. He claims US Social Security won’t be allowed to go bankrupt, and that there are easy fixes to the funding shortage, but those fixes involve either the Republicans or the Democrats compromising on their fundamental beliefs; for the Republicans that involves raising payroll tax rates, and they despise raising taxes, ever; for the Democrats that involves lower benefit payments to retirees, which they are loathe to do.  Neither side wants to make these compromises and so while in practice the solution may seem simple, politically it is not.  Since retirees are an active voting force in any US election, upsetting this group is politically painful, and so the likely answer, from either party, is to find the money to cover the forecasted shortfall,  elsewhere in the budget.  For example, the amount of additional funding needed to cover the forecasted shortfall and keep paying full Social Security benefits, for the next 25 years, is $318 billion, or 1.06 percent of the US GDP. To put that in perspective, the current Administration is proposing to  increase military spending next year by $420 billion, the equivalent to about 1.4 percent of GDP, taking the US military budget from $900 billion to $1.3 trillion, or $3.6 billion per day. So, the proposed increase to the already exorbitant US military budget, alone, would cover the cost of addressing the impending US Social Security funding issue for the next 25 years.  Krugman is correct…the solution to this issue is easily within reach.  

Do We Have An Issue In Canada? 

No, we don’t, thanks to some proactive and thoughtful planning by former Canadian Prime Minister Jean Chretien, and then Finance Minister, Paul Martin.  

In a review published in December 2025, Canada's Chief Actuary confirmed the sustainability of both the base and the additional Canada Pension Plan (“CPP”) over the long term, at the currently legislated CPP contribution rates from employers and employees.  According to the Chief Actuary, the CPP fund is projected to remain financially sustainable for at least the next 75 years. This is a dramatically different picture from the US Social Security system. 

Canada faced a demographic reckoning in the mid-1990s, but acted decisively then.  Federal and provincial governments reformed the CPP in 1997 by: raising contribution rates gradually; creating the independent CPP Investment Board to professionally manage the fund; shifting from pure pay-as-you-go to a partially funded model.  This proactive reform three decades ago is the primary reason Canada is not facing the same crisis as the US today.  The Chrétien-Martin fiscal reforms of the 1990s are widely regarded by economists as one of the most successful fiscal turnarounds in the developed world, taking Canada from significant deficits and debt concerns to surpluses, while simultaneously putting the pension system on sound long-term footing. The CPP's current strong financial position, with $793 billion in assets and projected sustainability for 75+ years, is a direct legacy of the actions taken by the Canadian government of the day, in 1997.

How Did The United States End Up In This Situation?

The US Social Security program is funded through a pay-as-you-go system, meaning that today's workers pay payroll taxes to the government that the government uses to make social security payments to today's retirees. It is not a fund or savings account where your contributions are held for your own future use. This system works when there are many workers supporting few retirees, but these demographics have shifted dramatically.

A fundamental problem is a shrinking ratio of workers to retirees:

• In 1950 there were approximately 16 workers contributing payroll taxes for this program, for every Social Security recipient.

• By 1960 there were only five workers per recipient.

• Today there are approximately 2.7 workers per recipient.

• By 2035 that ratio is projected to fall to approximately 2.2 workers per recipient.

This shift in contribution ratio is attributable to several reasons:

• The Baby Boom generation (born 1946–1964) is now retiring en masse; roughly 10,000 Americans turn 65 every day. 

• Falling birth rates mean fewer workers entering the workforce to replace them.

• Longer life expectancy means retirees collect benefits for longer than the system was originally designed to accommodate; when Social Security was created in 1935, the average American didn't live to age 65.

This problem has been brewing for quite some time and both the Republican and Democratic governments share the responsibility for allowing the issue to get to this point.  

Some of the commonly proposed fixes for the forecasted shortfall in funding for the US program, include:

• Raise the Payroll Tax Rate -  Currently at 12.4% (split between the employer and the employee) on earnings up to $168,600; raising that contribution rate by merely one or two percentage points would significantly increase funding for the program. 

• Raise or Eliminate the Earnings Cap - Currently only the first $168,600 of income is subject to Social Security payroll taxes; earnings above that are completely exempt, meaning high earners pay a lower effective rate; eliminating the cap entirely would largely close the funding gap. 

• Raise the Full Retirement Age - Currently, Social Security benefits are available once a person turns 67; raising that eligibility age to 68 or 69 would reduce lifetime benefits paid.

• Reduce Benefits - This could be done through changing the formula for calculating initial benefits, or by reducing the annual Cost of Living Adjustment (COLA) that increases benefits with inflation.

• Means Testing - Reducing or eliminating benefits for wealthy retirees who don't need them; this is administratively complex and faces opposition from those who argue they "paid in" their whole lives and shouldn’t be short-changed when they’re entitled to their benefits. 

• Increase Immigration - By admitting more working-age immigrants paying payroll taxes would help the worker-to-retiree ratio.

There is no shortage of ideas on how to solve the US’s growing under-funding problem; the challenge lies in the current divisive political climate, making some of these obvious solutions to this problem, difficult to implement. This inaction and political stalemate leaves retirees worried if their expected benefits will be there to support their living expenses.  And, the current generation of funders (Millennials, Gen Z, and some Gen X) are nervous about paying into the system now, when they don’t know if these benefits will be there when it’s their turn to collect.  

How do Millennials and Gen Z feel about paying into social security/CPP for their parents and grandparents?

There is support in these age cohorts for social insurance programs such as Social Security  and the Canada Pension Plan.  However, they are concerned about fairness, affordability, and whether the systems will be there for them when they retire.  These views held by Millennials and Gen Z are as follows: 

1. They generally support the concept.

Many Millennials and Gen Z believe society should provide retirement income for seniors. Most do not advocate eliminating Social Security or CPP.  Common views held by these age cohorts include that:

• Seniors should not live in poverty.

• Workers should contribute to a shared retirement system.

• Government-backed pensions provide a safety net that private savings alone may not.

  
  

2. They do worry that the previously held assumptions may no longer hold. Frequently expressed concerns include:  

• People are living longer.

• Birth rates are lower.

• There are fewer workers supporting each retiree than in previous generations.

As a result, many younger people believe they may have to:

• Pay more into the system.

• Receive reduced benefits.

• Retire later than their parents or grandparents.

• Expect their own savings to cover more of their retirement lifestyle. 

3. Housing and cost-of-living pressures matter

Many younger Canadians and Americans face:

• High housing costs

• Student debt (especially in the U.S.)

• Slower wage growth relative to living expenses

This can create resentment, not necessarily toward retirees, but toward a system they perceive as asking them to contribute while they find it harder to build wealth themselves. Younger Canadians tend to be more concerned about affordability today than about CPP disappearing altogether.  Social Security in the United States faces more pronounced  funding concerns. This has led to greater skepticism among Millennials and Gen Z in the U.S. than is typically seen regarding CPP in Canada. 

Conclusion

Historically Baby Boomers, and to some extent Gen X, grew up with the expectation that Social Security or CPP would contribute a meaningful amount towards funding their golden years. And, there are large numbers of people who genuinely need these benefits to fund their retirement. However, the irony is that in both the US and Canada, statistics show that Baby Boomers hold over 50% of the household wealth of each country, and Gen X hold about 25%. Meaning that many Baby Boomers and Gen X don’t actually need Social Security or CPP benefits.  Given this, those paying into the system today should be advocating now for the implementation of the “Means Test” discussed above.  A Means Test would ensure those that genuinely need Social Security or CPP would receive it, while those that don’t need it can forgo what amounts to “fun money”.  This would partially address the under-funding problem facing the US, and make the system more equitable in the eyes of those currently paying into it.