A U.S. Treasury report out last week found that the Social Security trust fund is projected to only be able to pay out full benefits through 2033, one year earlier than what the 2020 report projected, and a key Medicare trust fund could run low on funds by 2026.

That said, the "worst case scenario" is not that the program will stop paying benefits completely.

"The bulk of Social Security's funding comes from dollars that come out of our paychecks and matched by our employers," William Arnone, the CEO of the National Academy of Social Insurance, said on Yahoo Finance Live (video above). "Worst case, let's say that in 2033 there's no more trust fund, that doesn't mean Social Security is gone — it means that the benefits that are to be paid that year will have to be cut across the board by 25%."

Arnone added that such a situation "is not good. I don't want to minimize how bad that is. But it's not zero. And I think people have to keep it in perspective that the trust fund is not the sole source of Social Security financing."

Americans, particularly younger generations, are quite jaded about whether Social Security will be around when they retire. One survey from Nationwide Financial found that 47% of millennials — defined as Americans currently between the ages of 25-40 — agreed that “I will not get a dime of the Social Security benefits I have earned.”

“Millennials, in particular, will need Social Security because they're missing something their parents or grandparents had and that was a good, old fashioned traditional pension,” Arnone says. “They're in jobs that don't have pensions — they have 401(k)s. They're going to need Social Security more than any other generation. ... Current workers have a lot at stake, and they have to realize that.”

'The key word in the Social Security trustees' report'

The latest reports from the U.S. Treasury gave the first comprehensive look at how much the coronavirus pandemic affected the two pillars of America's social safety net (Social Security and Medicare), finding that the effects of the pandemic could be less than many have feared over the last year.

“The key word in the Social Security trustees' report is the word 'uncertainty,'” Arnone said. “There's still more questions than answers in terms of: What are the long-range impacts of COVID, the pandemic, and the economic recession?”

The biggest risks to financing Social Security, according to Arnone, are if “we go back to the days of stagnation, high unemployment, and high inflation. Some of your viewers might remember the '70s... that killed Social Security's financing.”

In the 1970s, the U.S. economy found itself struck by a high inflation rate, slowing economic growth, and high unemployment combined with economic shocks like the 1973 oil crisis.

The U.S. is currently nowhere near that scenario; while inflation has crept up in 2021, economic growth has remained high and unemployment ended August at 5.2%.

Nevertheless, the stakes are still high. The report stated that if there is no meaningful federal action by 2033, Social Security would shift to pay out 76% of its scheduled benefits. Budget experts like Marc Goldwein, Senior Policy Director for the Committee for a Responsible Federal Budget, recently noted that “time is running out to ‘sensibly’ save Social Security” in the form that people have come to expect.

"The bottom line is: Something must be done, and the recommendation every year for the past five years has been [that] the longer we wait, the more difficult the action becomes," Arnone said. "So this is another wake-up call for Congress and the administration to make Social Security a front-burner issue."

Lawmakers have proposed different ideas from convening a bipartisan group with the power to make a plan for the federal trust funds to proposing a different bill, championed by Democrats, that would raise benefits through payroll tax increases and new taxes on the highest income earners.

Neither idea has gained significant traction in Congress yet, but "the sooner you deal with it," Arnone stressed, "the less pain there will be."

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Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.

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