Social Security Trust Fund: Projections, Shortfall and Proposed Fixes

Projected: retirement fund reserves run out Shortfall

Under the 2026 Trustees Report’s intermediate assumptions, the OASI trust fund, which pays retirement and survivors benefits, would exhaust its reserves in the fourth quarter of 2032. From then, incoming payroll taxes and benefit taxes would cover about 78% of scheduled benefits. Current law does not allow the program to borrow or to pay more than it has, so the shortfall would mean an automatic, across-the-board reduction.

Projected: combined funds run out Shortfall

If the retirement and disability funds were pooled, which would take legislation, the combined reserves would last until 2034, with about 83% of benefits payable after that. The DI fund on its own is projected to stay solvent for the full 75-year window, because disability claims have fallen since the mid-2010s.

A 3.6% COLA for 2027 Benefits

The Social Security Administration announced a 3.6% cost-of-living adjustment for 2027, after 2.8% for 2026, driven by higher inflation and fuel prices earlier in the year. The cap on earnings subject to Social Security tax will rise from $184,500 to $192,300. The increase protects beneficiaries’ purchasing power, but it also raises the program’s costs, and CRFB warned that the scheduled 2032 cut would erase years of such increases.

CBO: exhausted in fiscal 2032, a 26% cut CBO

The Congressional Budget Office published its own long-term projections. It too found the OASI fund exhausted in fiscal year 2032, but with a slightly larger 75-year shortfall than the Trustees, 4.6% of taxable payroll, and a deeper cut at exhaustion, about 26%. CBO had first moved its exhaustion date a year earlier, to 2032, in its February 2026 baseline, citing the 2025 reconciliation act, higher tariffs and lower immigration.

The two sets of numbers use different economic and demographic assumptions and should not be treated as identical, but they agree on the core point: the retirement fund has about six years left.

The House’s leading expansion advocate loses his seat Proposal

John Larson, the ranking Democrat on the Ways and Means Social Security subcommittee and author of the Social Security 2100 Act, lost his primary. The bill, which he had reintroduced as H.R. 9519 on 29 June 2026 with a Senate companion from Richard Blumenthal on 21 July, would raise benefits and impose payroll tax on earnings above $400,000. It will need a new House champion in the next Congress.

Bipartisan senators propose the PROMISE Act Proposal

Six senators from both parties introduced a bill that would not itself fix Social Security, but would force Congress to vote on a fix. The Social Security Advisory Board would submit a draft ‘base bill’; congressional leaders or any bipartisan pair could offer alternatives; and the process would end in an up-or-down vote on a plan restoring solvency for at least 50 years, with a new review every decade. Bill Cassidy separately continued to promote a proposed investment fund to help close the gap.

2026 Trustees Report: OASI date moves to late 2032 Trustees

The Trustees moved the projected OASI depletion date one quarter earlier, to the fourth quarter of 2032, and kept the combined date at 2034. The long-range actuarial deficit jumped from 3.82% to 4.42% of taxable payroll, the widest in about half a century. The biggest drivers were a lower long-run fertility assumption (lowered to 1.75 children per woman, from 1.9), lower assumed immigration and the 2025 tax law.

In 2025 the combined funds took in $1.45 trillion and paid out $1.61 trillion, so reserves fell by $160 billion to $2.56 trillion. More than 71 million people were receiving benefits.

CBO brings its exhaustion date forward a year CBO

In its ten-year baseline, the CBO projected the OASI trust fund would be exhausted in fiscal year 2032, one year sooner than it had projected a year earlier. CBO Director Phillip Swagel said benefits would then be cut automatically unless Congress intervened.

The 2025 tax law adds a senior deduction Law

The reconciliation law did not change Social Security directly, but its temporary extra deduction for older taxpayers reduces the income tax collected on Social Security benefits, part of which is credited to the trust funds. The Trustees later counted it among the three main reasons the outlook worsened.

2025 Trustees Report: OASI in 2033, deficit 3.82% Trustees

The 2025 report brought the OASI date to the first quarter of 2033 and the combined date forward a year, to 2034, partly to account for the cost of the Social Security Fairness Act. The 75-year deficit rose from 3.50% to 3.82% of taxable payroll.

Social Security Fairness Act signed Law

Joe Biden signed a bill ending two rules that had reduced Social Security for people who also received pensions from jobs not covered by Social Security, including many teachers, police officers and firefighters, and their spouses. It was a long-sought fix for those workers, but with no new revenue attached it increased the program’s long-term costs.

2024 Trustees Report: combined date 2035 Trustees

A stronger economy and labour market nudged the combined depletion date a year later, to 2035, while the OASI date held at 2033. It was the last report in which the outlook improved.

Costs exceed total income Shortfall

From 2021, Social Security’s annual costs exceeded all its income, including interest on the trust funds, so the program began drawing down the reserves built up after 1983. The pandemic also disrupted employment and mortality, and so the assumptions behind the projections.

Congress patches the disability fund Law

Faced with a projected DI shortfall that would have cut disability benefits by about a fifth, Congress temporarily reallocated part of the 12.4% payroll tax rate from the retirement fund to the disability fund. It solved the near-term problem without changing total revenue, which is why it is often cited as a model for, and a warning about, last-minute fixes.

Costs pass non-interest income Shortfall

For the first time since the 1983 rescue, Social Security’s costs exceeded its income from payroll taxes and taxes on benefits, with interest on the trust funds’ Treasury securities covering the difference. The first baby boomers, born in 1946, had become eligible for early retirement benefits in 2008.

Personal accounts proposal stalls Proposal

After his re-election, George W. Bush toured the country promoting voluntary personal retirement accounts funded by part of the payroll tax. Opposition from Democrats and wavering Republicans meant the plan never reached a vote. It was the last major attempt at structural reform.

More benefits become taxable Law

A second tier of benefit taxation was added on top of the 1983 rules. The thresholds for both tiers were never indexed to inflation, so a growing share of retirees pays tax on benefits each year, which slowly adds income to the funds.

Reagan signs the bipartisan rescue Law

With the retirement fund months from being unable to pay benefits on time, the National Commission on Social Security Reform, chaired by Alan Greenspan, produced a compromise that Congress passed and Reagan signed. It accelerated payroll tax increases, made up to half of benefits taxable for higher earners, covered new federal employees, delayed a cost-of-living adjustment by six months and phased in a higher full retirement age. The package built up the reserves now being drawn down.

Carter-era amendments fix the formula Law

A flaw in how the 1972 automatic adjustments worked meant some new benefits were effectively indexed twice. The 1977 amendments fixed the formula and raised taxes, but high inflation and a weak economy left the fund in trouble again within a few years.

Automatic cost-of-living adjustments Benefits

Before 1972, Congress raised benefits by legislation from time to time. The 1972 amendments made increases automatic, tied to the Consumer Price Index, and the first automatic COLA took effect in 1975.

Disability insurance added Law

Disability benefits were introduced for insured workers aged 50 to 64, financed through a separate Disability Insurance trust fund. The age limit was later removed. The OASI and DI funds remain legally separate today, which is why there are two depletion dates.

Monthly benefits begin Benefits

Payroll tax collection began in 1937. The 1939 amendments added benefits for dependants and survivors and brought monthly payments forward to 1940. The first monthly retirement cheque went to Ida May Fuller of Vermont, who went on to collect benefits for 35 years.

Roosevelt signs the Social Security Act Law

Franklin D. Roosevelt signed the Act in the depth of the Depression. It created a national old-age insurance program financed by contributions from workers and employers, which became the basis of today’s Social Security.