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According to the 2026 Trustees Reports, the Old-Age and Survivors Insurance (OASI) Trust Fund, which finances retirement and survivor benefits, is projected to pay 100% of scheduled benefits until the fourth quarter of 2032.
Once its reserves are depleted, continuing program income would be sufficient to cover approximately 78% of scheduled retirement and survivor benefits, assuming no legislative changes.
The projection does not mean Social Security payments would stop entirely. Payroll tax revenue and other continuing income would remain available, but the program would lack sufficient resources to pay all scheduled benefits under existing law.
- Social Security and SSI benefits will increase 3.6% in 2027, affecting approximately 76 mn Americans, with average retirement payments rising by $75 per month.
- The Social Security retirement and survivors trust fund is projected to exhaust its reserves in the fourth quarter of 2032, when continuing income would cover only 78% of scheduled benefits.
- Federal retirees under the Civil Service Retirement System will receive a 3.6% COLA, while eligible Federal Employees Retirement System annuitants will receive 2.6%.
The outlook is more favorable for the separate Disability Insurance (DI) Trust Fund, which is projected to pay full scheduled benefits through at least 2100, the end of the trustees’ forecast period.
On a hypothetical combined basis, the retirement and disability trust funds, collectively known as OASDI, would be able to pay full scheduled benefits until the third quarter of 2034.
At that point, continuing income would cover approximately 83% of scheduled benefits.
Combining the two trust funds would require a change in federal law. The combined projection is used as a measure of Social Security’s overall financial position and should not be interpreted as an extension of the retirement trust fund’s existing legal funding authority.
The combined depletion date remains unchanged from the 2025 report, although the program’s projected long-term financial balance has deteriorated.
Demographic changes and federal tax legislation weaken projections
The trustees identified three principal factors behind the deterioration in Social Security’s long-term finances.
- First, the assumed ultimate fertility rate was reduced from 1.90 to 1.75 children per woman, indicating a smaller future working-age population.
- Second, the latest projections incorporate lower historical and anticipated net immigration, further reducing the number of workers expected to contribute payroll taxes over the coming decades.
- Third, federal tax changes introduced through the One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, are expected to reduce future income tax revenue allocated to the Social Security trust funds.
The legislation made permanent lower individual income tax rates and adjusted brackets originally introduced under the 2017 Tax Cuts and Jobs Act. It also increased and made permanent the larger standard deduction and introduced a temporary additional deduction for eligible taxpayers aged 65 and older.
These provisions reduce projected revenue from federal income taxes on Social Security benefits, which partly supports the retirement and disability trust funds.
The trustees cautioned that their projections are based on intermediate assumptions established in February 2026 and will be revised as demographic, economic and legislative developments become clearer.
Medicare Hospital Insurance fund faces a 2033 shortfall
Medicare faces its own financing challenges. The Hospital Insurance (HI) Trust Fund, which primarily supports Medicare Part A inpatient hospital and related services, is projected to pay full scheduled benefits until the second quarter of 2033. That is also one quarter earlier than estimated in the previous report.
Following reserve depletion, continuing income would cover approximately 89% of scheduled benefits.
The weaker outlook reflects higher expected utilization of certain medical services, upward revisions to projected per-capita Medicare Advantage expenditures and reduced revenue from income taxation of Social Security benefits following the 2025 tax legislation.
Lower-than-expected Medicare expenditures in 2025 and changes in demographic and economic assumptions partly offset these pressures.
The financial structure of Medicare Parts B and D differs from that of the Hospital Insurance program.
The Supplementary Medical Insurance (SMI) Trust Fund, which supports outpatient and physician services under Part B and prescription drug coverage under Part D, is considered adequately financed indefinitely because beneficiary premiums and federal contributions are adjusted to cover anticipated costs.
The trustees expect Medicare Part B spending relative to GDP to be lower over the first decade of the forecast than previously projected, largely because of policy changes introduced in 2026 involving certain physician-administered drugs.
However, faster spending growth for other Part B drugs is expected to push expenditures slightly above previous estimates as a percentage of GDP by 2048. The outlook for Part D prescription drug coverage has deteriorated more substantially.
Projected Part D expenditure relative to GDP is higher throughout the forecast period, reflecting increased utilization of certain specialty drugs during 2025, stronger drug cost growth and lower expected pharmacy and manufacturer rebates during the first 10 years.
Beyond 2048, lower long-term GDP projections, particularly those linked to reduced fertility assumptions, contribute to faster growth in both Part B and Part D expenditures relative to the economy.
Federal retirees face different 2027 COLA increases
The announced 3.6% Social Security adjustment also determines cost-of-living increases for many federal retirement annuities, although the amount depends on the retirement system.
Federal retirees covered by the Civil Service Retirement System (CSRS) will receive the full 3.6% adjustment to their eligible annuity payments.
Eligible retirees under the Federal Employees Retirement System (FERS), however, will receive a smaller 2.6% adjustment because of statutory limits on their annual increases.
Under FERS rules, when the measured COLA exceeds 3%, the adjustment to eligible annuities is reduced by one percentage point. When inflation is between 2% and 3%, the FERS adjustment is limited to 2%. For increases below 2%, the full adjustment generally applies.
Some FERS annuities are not eligible for COLAs until the recipient reaches age 62, subject to exceptions.
The National Active and Retired Federal Employees Association (NARFE) argues that reduced FERS adjustments gradually erode retirement income, particularly as healthcare premiums and other household expenses increase.
“FERS retirees will have their COLAs reduced by an entire percentage point, reducing the real value of their annuities,” said NARFE National President William Shackelford.
Legislation introduced in January 2025, known as the Equal COLA Act, seeks to eliminate the difference by providing eligible FERS retirees with the same inflation adjustments as CSRS annuitants.
The proposed legislation had attracted 90 House cosponsors, but had not advanced into law as of the reporting period.
Higher benefit payments and 2027 tax adjustments
The 2027 COLA will also affect several federal benefit thresholds and payment limits. The maximum annual earnings subject to Social Security payroll taxes will increase from $184,500 in 2026 to $192,300 in 2027.
The standard Social Security tax rate remains 6.2% for employees and employers separately, while the Medicare payroll tax remains 1.45% for each, subject to additional Medicare taxes on higher earnings.
For SSI recipients, the maximum federal monthly payment for an eligible individual will increase from $994 to $1,029, while the maximum for an eligible couple will rise from $1,491 to $1,544.
Actual benefit increases will vary according to each individual’s payment history, eligibility and applicable deductions.
For retirees enrolled in Medicare, changes in Part B and other premium amounts may affect the net increase received after deductions.
The Social Security Administration said information about 2027 Medicare premiums will become available later in the year.
Beneficiaries with personal my Social Security accounts will be able to view personalized COLA notices online beginning in late November. Those who do not receive electronic notices will generally receive mailed notifications in December.
Funding deadlines increase pressure on Congress
The 2027 increase provides near-term inflation relief, but it does not resolve the structural funding gap identified by the trustees.
The projected retirement trust fund depletion in 2032 and the hypothetical combined trust fund depletion in 2034 represent different measures of the program’s finances.
Both illustrate the pressure on policymakers to address the difference between future benefit obligations and available revenue.
Potential legislative responses include changes to revenue, benefit formulas, retirement rules or combinations of these approaches.
The trustees emphasized that earlier legislative action would provide more options and allow any changes to be introduced gradually, giving workers and retirees additional time to adjust.
Without changes to current law, the program’s continuing income is projected to remain insufficient to finance all scheduled retirement benefits once the relevant trust fund reserves are exhausted.
The Social Security Administration (SSA) has announced a 3.6% cost-of-living adjustment (COLA) for 2027, increasing monthly payments for millions of Americans as the federal retirement system faces mounting long-term financing pressures.
The adjustment, announced on October 14, 2026, will raise average Social Security retirement benefits by approximately $75 per month, from $2,095 to $2,170, beginning in January 2027.
Nearly 72 mn Social Security beneficiaries will receive the increase, while approximately 7.3 mn people receiving Supplemental Security Income (SSI) will see higher payments beginning December 31, 2026. Because some individuals receive both programs, the adjustment will affect about 76 mn Americans in total.
The 3.6% increase exceeds the 2.8% adjustment implemented in 2026 and is slightly above the 10-year average of approximately 3.1%.
