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An important fund that helps with finances social Security benefits are on track to reach bankruptcy by 2032, when automatic benefit cuts occur without action from Congress, a new report finds.
The nonpartisan Congressional Budget Office (CBO) released its 10-year budget and economic outlook that predicts Social Security’s Old-Age and Survivors Insurance (OASI) fund will be depleted by 2032 as spending outpaces trust fund revenue — with the gap widening over time.
CBO estimates that spending from Social Security’s OASI trust fund will increase from $1.5 trillion this fiscal year to more than $2.5 trillion by 2036. After accounting for tax receipts and interest income, the expected deficit of the trust fund increases from $207 billion this year to $525 billion in 2032, as the trust fund continues to shrink, the trust fund continues 9. 2036, assuming full benefits are paid.
Social Security benefits are funded by tax receipts and the OASI trust fund, and once the trust fund is depleted, the federal government will be able to pay in benefits what it receives in taxes paid under the law – ie. benefits will face cuts without an act of Congress.
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The increase in Social Security costs has had the effect of reducing the trust fund’s value. (Getty Images/iStock)
The CBO explained that “the government will continue to collect income tax and payroll designated funds, and funds will continue to pay. But because the government will not have the legal authority to make payments in excess of receipts, it will no longer be able to pay the full amounts planned or expected under current law. “
A hypothetical scenario tested by CBO finds that benefits paid to beneficiaries would be reduced by 7% in 2032 and by an average of 28% annually from 2033 to 2036. We also note that the process for reducing benefits is not spelled out in federal law, and that different methods of cutting Social Security benefits to match a different income tax budget.
The Committee for a Responsible Federal Budget (CRFB), a nonpartisan think tank, previously estimated based on a 24% reduction in benefits that the average 60-year-old couple retiring during bankruptcy would face an $18,400 reduction in their annual benefits.
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The threat of looming deficits over the critical Social Security fund comes as spending on the entitlement program rises amid an aging American population.
Social Security spending as a share of gross domestic product (GDP) reached 4.5% from 1976 to 2025. It is expected to increase from 5.2% of GDP this year to 5.9% in 2036. In dollars, Social Security spending is estimated at more than $1.6 trillion by 2026 and is expected to rise to more than $2.7 billion a decade from now.
Mandatory spending programs, including Social Security and Medicare, are the main drivers of increases in government spending and budget deficit. In the period 1976-2025, compulsory spending accounted for 11.2% of GDP, but is expected to reach 14.2% of GDP this year and increase to 15% in 2036.
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Defunding the Social Security primary fund would result in automatic benefit cuts unless Congress acts. (Bill Clark/CQ-Roll Call, Inc/Getty Images/Getty Images)
Costs arising mandatory programs it is expected to total $4.5 trillion by 2026, making up a large portion of the federal government’s more than $7.4 trillion in spending this year. Ten years from now, mandatory spending is expected to cost more than $7 billion of the $11.4 trillion federal budget.
Optional use, including federal agencies annually budget process in Congressit is expected to total around $1.9 trillion by 2026 and rise to $2.2 trillion over the next decade.
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Interest costs incurred on servicing the national debt are also expected to rise from $1 trillion in 2026 to more than $2.1 trillion in 2036.
