The Congressional Budget Office's February 2026 Budget and Economic Outlook delivered unwelcome news for anyone counting on Social Security in the next decade. The Old-Age and Survivors Insurance (OASI) trust fund is now projected to be depleted in fiscal year 2032, roughly one year earlier than the prior CBO estimate and two years earlier than the 2024 projection. Once the reserves are gone, incoming payroll taxes will cover only a portion of promised benefits, triggering an automatic cut.
The size of that cut has also grown. CBO's illustrative scenario shows benefits reduced by about 7 percent in 2032 and by an average of 28 percent per year from 2033 through 2036. On a theoretically combined basis, the retirement and disability trust funds together are projected to exhaust in 2034.
Why the Date Moved
CBO cited three main reasons the insolvency window tightened. First, the 2025 reconciliation legislation created a new senior deduction that reduced income subject to the taxation of Social Security benefits, pulling revenue away from the trust fund. Second, Medicare Part A spending came in higher than expected in 2025, with further increases in Medicare Advantage costs for 2026. Third, demographic trends continue to work against the program as the population ages more quickly and the growth of the payroll-tax-paying workforce slows.
These are structural shifts rather than one-time accounting changes, which is why the Committee for a Responsible Federal Budget describes Social Security as "racing toward insolvency" rather than drifting into it.
What a 28 Percent Cut Looks Like
For the average retired worker receiving just under $2,000 per month, a 28 percent reduction would cut monthly benefits by roughly $560, or about $6,700 per year. CRFB estimates that a typical dual-earner couple retiring around the time of insolvency could see an annual benefit reduction of approximately $18,400.
Translating that shortfall into a savings target helps frame the planning problem. At a conservative 4 percent withdrawal rate, replacing $6,700 of lost annual benefits would require roughly $165,000 in additional retirement capital. A couple aiming to offset $18,400 would need closer to $460,000 in extra savings.
Practical Moves for Retirement Savers
No one knows whether Congress will act before 2032, but planning as if benefits will be trimmed is a defensive posture worth considering. A few steps to evaluate:
- Pull your personal benefit estimate from ssa.gov and model your retirement budget with a 23 to 28 percent haircut applied after 2032. The gap you see is the planning problem.
- Re-examine your claiming strategy. Delaying benefits from age 62 to age 70 can increase monthly payments by up to 76 percent, partially offsetting a later cut.
- Build tax diversification across pre-tax, Roth, and taxable accounts so you can control taxable income and manage Medicare premium surcharges in retirement.
- Consider whether a portion of your portfolio in assets historically used as inflation hedges, such as Treasury Inflation-Protected Securities or precious metals, fits your situation, since a reduced Social Security benefit is more vulnerable to inflation erosion.
- For those still working, increasing 401(k) and IRA contributions now buys compounding time, which is the cheapest source of future retirement income.
The Bigger Picture
Social Security was designed as one leg of a three-legged stool alongside employer pensions and personal savings. With pensions largely replaced by defined-contribution plans and the public leg now on a firmer timeline to downsize, the personal savings component is carrying more weight than ever. The updated CBO baseline does not change what retirees should be doing so much as it sharpens the urgency. Savers who build a plan that still works with a smaller Social Security check will be positioned regardless of what Congress ultimately decides.
Sources: Congressional Budget Office, Committee for a Responsible Federal Budget, Bipartisan Policy Center