Social Security's main trust fund faces depletion in 2032, triggering benefit cuts

A critical trust fund that helps finance Social Security benefits is on track to reach insolvency in 2032, when automatic benefit cuts would occur without action from Congress, a new report finds.

The nonpartisan Congressional Budget Office (CBO) released its 10-year budget and economic outlook which projected that Social Security's Old-Age and Survivors Insurance (OASI) trust fund will be depleted in 2032 as spending outpaces the trust fund's income – with the gap growing over time.

CBO estimates that spending from Social Security's OASI trust fund will rise from $1.5 trillion this fiscal year to more than $2.5 trillion in 2036. After accounting for tax receipts and interest income, the projected deficit for the trust fund rises from $207 billion this year to $525 billion in 2032, when the trust fund is depleted, and continues to rise to $691 billion in 2036, assuming full benefits are paid out.

Social Security benefits are funded by payroll tax receipts along with the OASI trust fund, and once the trust fund is tapped out, the federal government would only be able to pay out in benefits what it receives from payroll taxes under the law – meaning benefits would face cuts without action by Congress.

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The CBO explained that "the government would continue to collect excise and payroll taxes designated for the funds, and the funds would continue to make payments. But because the government would not have the legal authority to make payments in excess of receipts, it would no longer be able to pay the full amounts scheduled or projected under current law."

An illustrative scenario examined by the CBO finds that benefits paid to beneficiaries would be cut by 7% in 2032 and by an average of 28% per year from 2033 to 2036. It also notes that the process for cutting benefits isn't outlined in federal law, and that different ways of cutting Social Security benefits to match incoming tax revenue would have different implications for the economy and budget.

The Committee for a Responsible Federal Budget (CRFB), a nonpartisan think tank, previously estimated based on a 24% benefit reduction that a typical couple aged 60 today who retires at the time of insolvency would face an $18,400 cut to their annual benefits. 

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The threat of insolvency looming over Social Security's key trust fund comes as spending on the entitlement program is surging amid the aging of America's population.

Social Security spending as a share of gross domestic product (GDP) averaged 4.5% from 1976 to 2025. It's projected to rise from 5.2% of GDP this year to 5.9% in 2036. In dollar terms, Social Security spending is estimated at over $1.6 trillion in 2026 and is projected to rise above $2.7 trillion a decade from now.

Mandatory spending programs, including Social Security and Medicare, are key drivers of the rise in federal spending and budget deficits. For the 1976-2025 period, mandatory spending accounted for 11.2% of GDP, but it's projected to reach 14.2% of GDP this year and rise further to 15% by 2036. 

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Expenses from mandatory programs are projected to total $4.5 trillion in 2026, making up the bulk of the federal government's more than $7.4 trillion in spending this year. A decade from now, mandatory spending is projected to account for over $7 trillion of the $11.4 trillion federal budget.

Discretionary spending, which covers federal agencies through the annual appropriations process in Congress, is expected to total nearly $1.9 trillion in 2026 and rise to $2.2 trillion over the next decade.

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Interest expenses incurred from servicing the national debt are also projected to increase from $1 trillion in 2026 to more than $2.1 trillion in 2036.