The Congressional Budget Office’s 2026 Budget and Economic Outlook projects that Social Security will run out of money to pay full benefits a year earlier than previously expected — in 2032. That means everyone from Gen X through Gen Alpha is on track not to receive a single full Social Security benefit.
By law, Social Security cannot pay out more in benefits than the program has in revenues. Thus, when the Old Age and Survivors Insurance (OASI) trust fund runs out of money in 2032, benefits will automatically be limited to incoming payroll tax revenues.
According to the CBO, that shortfall would trigger a 28% benefit cut—significantly higher than the 24% cut CBO projected in 2025 and the 23% cut projected by the Social Security Trustees in 2025.
For the average beneficiary who currently receives just under $2,000 per month, a 28% reduction would mean about $560 less per month—roughly $6,700 less per year. Absent reform, those cuts will apply to roughly 70 million Americans receiving retirement and survivors' benefits in 2032—regardless of whether they are 65 or 95, and regardless of whether they have $20,000 or $200,000 of income.
Social Security has been on the path to insolvency for decades, but several factors are hastening the trust fund’s insolvency.
First, CBO notes higher cost-of-living adjustments (COLAs) that increase Social Security benefits each year. In part, that is the result of tariffs leading to higher-than-expected inflation in the near term.
Second, CBO estimates that Social Security revenues will grow more slowly. Although not specified, lower revenues generally stem from lower employment, lower income growth, or both.
As noted, employment was lower than anticipated in 2025 due to changes in immigration policy and reduced federal employment. But the CBO projects that the One Big Beautiful reconciliation act will increase labor force participation, both by stimulating general economic growth and by limiting welfare without work for able-bodied, working-age Americans.
And while already incorporated into CBO’s prior 2025 outlook, a bill passed by Congress at the end of 2024 — the so-called Social Security Fairness Act — expedited Social Security’s insolvency by six months. It did that by providing upwards of $200 billion in mostly windfall benefits to public sector workers who had been exempt from Social Security taxes.
An alternative to benefit cuts is tax increases, but maintaining 100 percent of currently scheduled benefits would require hiking Social Security’s 12.4% payroll tax to roughly 17%—about $2,900 more per year from the paychecks of a median worker earning $63,000.
Across-the-board benefit cuts would be especially detrimental to lower-income retirees. A more constructive and compassionate solution is to gradually limit benefits for higher earners while protecting lower- and middle-income retirees.
The CBO finds that limiting benefits to Social Security’s 12.4% payroll tax revenues would improve the long-run economy by increasing work and savings while reducing federal borrowing.
The Penn Wharton Budget Model estimates that a smaller and more targeted Social Security program could increase long-term GDP by 5.3%, while a larger program would reduce GDP by 1%. That’s a difference of about $4,000 per year in median household income across the United States.
Social Security’s $25.1 trillion shortfall won’t fix itself. The sooner policymakers take action, the greater opportunity they will have to strengthen the program, grow the economy, and demonstrate to global markets that U.S. policymakers are willing to address their fiscal imbalances before a fiscal crisis forces their hand.
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