Social Security is Now Less Than Six Years from Insolvency

The Social Security retirement trust fund is now less than six years from insolvency, according to CRFB’s Insolvency Countdown Clock. Without action from policymakers, beneficiaries will face a deep and abrupt 22% benefit cut when the retirement fund is exhausted in late 2032. That is when today’s 61-year-olds will reach their normal retirement age and when today’s youngest retirees turn 68.

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These estimates are based on the projections of the 2026 Social Security Trustees’ Report, which projects that Social Security’s retirement fund will be exhausted in the final quarter of 2032. On a theoretically combined basis, the Social Security Trustees project that the combined trust funds will run out in mid-2034, less than two years later.

Over time, the necessary cuts to benefits after insolvency would grow. In 2032, benefits would need to be reduced by 22% to bring costs in line with program revenues. But by the end of the century, the required cuts would grow to 38%.

These cuts would be devastating for beneficiaries. If a similar cut were imposed on retirees today, the average retiree would lose around $500 in benefits per month, more than what the average retired household spends on groceries. The effects would be felt nationwide, and no state would be spared from the impacts of insolvency.

Just six months after retirees are expected to see sudden cuts to their Social Security benefits, the Medicare Trustees project the Medicare Hospital Insurance trust fund will run dry, necessitating an 11% reduction in hospital spending. Such a cut would threaten retirees’ access to health care as payments to providers are delayed or denied.

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While time to shore up the nation’s trust funds is quickly running out, there are many trust fund solutions available to policymakers to increase revenues and slow the growth in program costs. Both revenue and spending changes will need to be on the table, and likely part of the final solution.

Slipping below the six-year mark until the insolvency of Social Security’s retirement trust fund is a timely reminder that now is the time for trust fund solutions. The quicker that policymakers act, the smaller the necessary adjustments will need to be, the more time there will be available to phase in reforms, and the greater the opportunities available to make targeted investments and benefit enhancements. Action is necessary – time is running out.