Social Security’s funding could run dry earlier than expected, according to a recent Congressional Budget Office (CBO) projection.
Social Security’s primary retirement account, the Old-Age and Survivors Insurance Trust Fund, could be tapped out by 2032, a full year earlier than the agency estimated just last year.
The benefits won’t vanish even if the trust fund reserves hit zero. Workers will still be paying into the system through payroll taxes, and that money will still flow to beneficiaries.
But according to an analysis from the Center on Budget and Policy Priorities, the Social Security Administration (SSA) would only be able to pay roughly 81% of promised benefits once reserves are depleted.
Why the timeline changed
The CBO’s revised projection stems from updated economic forecasts predicting higher inflation in the coming years. That matters because Social Security’s cost-of-living adjustment, or COLA, is tied directly to inflation.
Higher COLAs mean larger benefit payments, which drain the trust fund faster. The CBO is projecting a 3.1% COLA for 2027, on the higher end of expectations.
The agency also expects lower income from payroll taxes and income taxes on benefits, further squeezing revenue.
The SSA has been dipping into trust fund reserves since 2021, when benefit costs started exceeding revenue. An aging population claiming more retirement benefits has created a structural imbalance.
If you’re already retired
Current retirees could be looking at a roughly 19% benefit cut. The smart move now is dissecting your budget. Look at your monthly expenses and identify where you’d make cuts if your Social Security check shrank by roughly a fifth.
Consider whether you have flexibility to generate supplemental income. Part-time work, even a few hours weekly, can provide a buffer.
Review any other income sources, including pensions, annuities or investment accounts. Understanding how much of your retirement depends on Social Security will help you gauge your exposure to potential cuts.
If retirement is 10 to 15 years away
You still have time to meaningfully change your retirement trajectory, but that window is narrowing.
Maximize your retirement savings contributions. If you’re 50 or older, you can make catch-up contributions to 401(k) plans and IRAs. Every extra dollar you set aside now is a dollar that doesn’t depend on congressional action.
Think strategically about when you’ll claim benefits. If you can afford to delay claiming Social Security, you’ll lock in a higher baseline that provides more security even if cuts materialize.
Finally, stress-test your retirement plan using conservative Social Security assumptions. Run the numbers assuming you’ll only receive around 80% of your projected benefit. If your plan still works under that scenario, you’re in decent shape.
If you have $10,000 or more to invest, look at other means to build wealth. Anthem Gold Group is committed to helping you protect your retirement with physical precious metals.
is committed to helping you protect your retirement with physical precious metals.If you’re decades from retirement
Younger workers probably shouldn’t count on receiving full Social Security benefits. That’s just prudent planning.
However, you have the benefit of time as your greatest asset. Start building independent retirement savings now. The power of compound growth over 20 or 30 years is substantial. Prioritize tax-advantaged accounts like 401(k)s and Roth IRAs.
Think of any eventual benefit as a bonus rather than a foundation.
The bottom line
Congress has fixed Social Security funding shortfalls before, and there’s still plenty of time for lawmakers to act. Potential solutions range from raising the payroll tax cap to adjusting benefit formulas to increasing the retirement age. The political will to address the issue has historically materialized when deadlines loom closer.
But don’t wait for Washington. The smart approach is preparing for a range of outcomes. Take the new CBO projections seriously and make adjustments within your control. Finally, remember that Social Security was always designed to be just one part of your retirement funds.
