Social Security retirees face a larger potential benefit reduction than projected earlier this year, according to the Congressional Budget Office’s latest long-term estimates.
CBO said on September 17 that the Old-Age and Survivors Insurance trust fund will exhaust its reserves during fiscal 2032 under current law.
After depletion, incoming Social Security revenue would finance about 74% of scheduled retirement and survivor benefits, implying an immediate reduction near 26%.
The projection is more severe than the estimate published by Social Security’s trustees in June. Their 2026 report also placed OASI depletion in 2032, around three months earlier than last year’s estimate, but projected continuing revenue sufficient for 78% of scheduled benefits.
That translates into a roughly 22% reduction under the trustees’ assumptions. The difference stems from separate economic and demographic assumptions used by CBO and the trustees rather than a change in Social Security law.
Social Security doesn’t stop collecting revenue when the trust fund reaches zero. Payroll taxes continue flowing into the program, though CBO expects those receipts to fall well short of scheduled obligations.
Under current law, Social Security generally lacks authority to borrow funds to maintain scheduled payments after trust fund reserves disappear. Benefits would therefore need to fall to the amount supported by available revenue unless Congress changes taxes, benefits or the program’s financing structure before depletion.
The Committee for a Responsible Federal Budget said CBO’s latest estimate puts OASI insolvency around mid-2032. Its analysis places Social Security’s 75-year shortfall at 4.6% of taxable payroll, with the 26% reduction after depletion increasing over subsequent decades.
By 2100, CRFB estimates the gap between scheduled benefits and available revenue would translate into a 40% reduction under CBO’s projections.
Those percentages describe payable benefits relative to scheduled benefits under current law, rather than a policy proposal for reducing payments.
Earlier calculations based on the trustees’ smaller 22% reduction already showed a substantial household impact. CRFB estimated in July that a typical dual-income couple retiring around the depletion date would lose about $16,900 annually under the trustees’ projection.
Key Comparisons Between the Social Security Trustees’ and CBO’s Projections
| Social Security Trustees | CBO | |
|---|---|---|
| Insolvency of Social Security’s Retirement Fund | 2032 | 2032 |
| Insolvency of the Combined Trust Funds | 2034 | 2033 |
| Retirement Benefit Cut After Insolvency | 22% | 26% |
| Retirement Benefit Cut in 2100 | 38% | 40% |
| Combined Program Long-Term Shortfall | 4.42% of taxable payroll (1.54% of GDP) | 4.57% of taxable payroll (1.56% of GDP) |
| Combined Program Annual Deficit in 2100 | 6.57% of taxable payroll (2.19% of GDP) | 7.22% of taxable payroll (2.44% of GDP) |
Trust fund solutions are urgently needed to save Social Security and to protect retirees from a benefit cut that CBO projects will be as high as 26%. The release of CBO’s 2026 Social Security projections is a timely reminder of the danger facing retirees if policymakers fail to act.
The longer it takes to address Social Security’s solvency shortfall, the greater the cost of fixing it will become. Timely action would limit the scale of the adjustments, provide more time to phase in needed reforms, and create additional opportunities to enact targeted benefit enhancements.
The newer CBO estimate implies greater pressure on future retirees, although CRFB hasn’t published an equivalent household-dollar estimate tied specifically to the 26% figure. Individual losses would differ according to earnings history, claiming age, marital status and other benefit calculations.
Combining the retirement and disability trust funds would postpone the problem rather than remove it. CBO projects theoretically combined OASI and Disability Insurance reserves would last until 2033.
At that point, continuing revenue would support about 77% of scheduled benefits, equivalent to a 23% reduction. CRFB estimates the gap would widen over time, reaching 37% by 2100 under the combined-fund scenario.
The Disability Insurance fund remains in substantially stronger financial condition than OASI. Reallocating its reserves therefore gives the retirement program additional time, though the combined system still faces a large long-term financing deficit.
Pressure for congressional action has increased as the depletion date moves closer.
At a House Budget Committee field hearing in Dallas on September 21, CRFB co-chair Leon Panetta warned that Social Security and Medicare are approaching financial deadlines within the next several years.
Panetta argued that lawmakers need to address federal retirement and health programs before their financing problems become harder to manage. His testimony supported creation of a fiscal commission, one of several approaches lawmakers have discussed for dealing with long-term federal spending and revenue gaps.
Congress remains divided over the structure of a Social Security agreement. Current proposals include higher taxes on upper-income earnings, changes to scheduled benefits, separate investment funds and new legislative procedures intended to force congressional consideration.
One proposal comes through the Social Security Expansion Act introduced in 2025 by Sen. Bernie Sanders, Sen. Elizabeth Warren, Rep. Jan Schakowsky and Rep. Val Hoyle.
The legislation applies Social Security payroll taxes to earnings above $250,000 while leaving a temporary gap between the existing taxable maximum and the new threshold.
For 2026, Social Security payroll taxes apply to wages up to $184,500. Employees and employers each pay 6.2%, producing a combined rate of 12.4%, while self-employed workers generally pay the full amount.
The Sanders legislation contains additional revenue provisions beyond the higher payroll-tax threshold. Those include higher taxes on certain investment and business income for upper-income households, with proceeds directed toward Social Security.
Its sponsors cite a Social Security Administration analysis of an earlier version showing the wider package would fund scheduled benefits for 75 years while also increasing some payments. The proposal also includes a $2,400 annual benefit increase and changes affecting minimum benefits and cost-of-living adjustments.
A separate proposal from Sens. Elizabeth Warren and Bernie Moreno focuses on removing the payroll tax ceiling. The Democratic and Republican senators announced in June that they were working together on legislation requiring higher earners to pay Social Security tax on more of their wages.
Removing the taxable maximum produces substantial revenue but doesn’t eliminate the full long-term deficit by itself under recent Social Security estimates.
The Peter G. Peterson Foundation, citing trustees’ estimates, puts the additional revenue from fully eliminating the cap at about $3.4 tn over 2026-2035 when newly taxed earnings also receive benefit credit.
Different designs produce different fiscal results. Applying the 12.4% tax above a new earnings threshold without equivalent benefit credit raises more net revenue than uncapping wages while granting additional future benefits.
Economic estimates are disputed as well. The Tax Foundation estimates that fully removing the cap would raise $3.2 tn over a decade on a conventional basis, but its economic model projects lower employment and output as higher marginal tax rates change compensation and work decisions.
Those figures depend heavily on assumptions about taxpayer behavior. Supporters of removing the ceiling focus instead on the extra revenue and the declining share of total national earnings subject to Social Security tax as income has become more concentrated above the taxable maximum.
Another proposal takes a different financing route. Sen. Bill Cassidy has advocated creating an investment fund outside the Social Security trust funds, financed initially with about $1.5 tn in federal borrowing over five years.
The fund would invest in a broader portfolio than Social Security’s existing Treasury securities, with investment returns directed toward the retirement system. Sen. Tim Kaine has expressed support for further work on the proposal as part of a bipartisan Social Security agreement.
CRFB strongly opposes the debt-financed investment approach. Its analysis argues that borrowing to purchase financial assets exposes taxpayers to market risk and leaves Social Security dependent on investment performance while increasing federal debt if returns disappoint.
Cassidy argues the structure would give Social Security access to higher long-term investment returns without directly reducing scheduled benefits.
The disagreement centers on whether expected investment gains justify the additional federal borrowing and financial risk.
Congress has also considered procedural approaches rather than prescribing a specific mix of tax or benefit changes. In July, Cassidy, Kaine and several other senators introduced the bipartisan PROMISE Act, which would establish a process requiring Congress to consider a Social Security solvency package.
Under that proposal, the Social Security Advisory Board would prepare a base bill designed to fund the trust funds for at least 50 years. Congressional committees would review the legislation before House and Senate votes under special procedures.
None of these proposals has resolved the broader political dispute over who should bear the cost of restoring solvency. Tax-focused plans place more of the adjustment on workers or higher earners, while benefit changes shift more of it toward current or future beneficiaries.
Waiting also changes the arithmetic. With fewer years remaining before 2032, any tax increase introduced gradually has less time to accumulate revenue, while phased benefit changes have less time to reduce projected spending.
Bipartisan Policy Center vice president Shai Akabas told the Senate Finance Committee in June that the remaining window for a manageable agreement was narrowing. His testimony argued that delaying action reduces the range of gradual policy options available to lawmakers.
CBO’s September forecast adds another estimate to that debate. Both CBO and the Social Security trustees now place retirement trust fund exhaustion in 2032, even though they differ on the size of the resulting benefit reduction. Under current projections, the question isn’t whether OASI has a financing gap. The disagreement concerns its size, how Congress distributes the cost of closing it and when lawmakers choose to act.
