US Social Security payments may be cut by 22% in 2032 — CNBC

In the United States, Social Security retirement benefits may be automatically cut by 22% in 2032 if Congress does not adopt measures to strengthen the system by then. According to the program’s trustees, the Old-Age and Survivors Insurance Trust Fund could be depleted in the fourth quarter of 2032.

As CNBC reports, this fund helps finance payments to eligible workers and their family members. The US Congressional Budget Office forecasts that reserves will be depleted faster — in mid-2032. Under this scenario, benefits could be cut by 26%.

Possible benefit reduction

The Committee for a Responsible Federal Budget estimated in a June report that, with a 24% benefit cut, the average monthly payment to recipients in the United States would decrease by about $500. In 29 states, the average reduction could be even larger.

According to Social Security trustees’ estimates, merging the retirement trust fund with the disability insurance fund could delay the depletion of funds until the third quarter of 2034. However, in that case, benefits could be cut by 17%.

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Options for Congress

To strengthen the system, lawmakers may need to raise taxes, cut benefits, or combine both approaches. Some Democratic Party candidates ahead of the midterm elections said they supported raising or eliminating the income cap subject to the Social Security payroll tax.

In 2026, this tax rate is 6.2% for employees and the same for employers, while income up to $184,500 is subject to taxation. Jessica Riedl, a researcher at the Urban-Brookings Tax Policy Center, believes that raising payroll taxes in the coming years is extremely unlikely.

Economic consequences

According to a study by the National Institute on Retirement Security, Social Security payments in 2023 generated $2.6 trillion in total economic output and supported more than 12 million jobs. The institute estimates that a 19% benefit cut could reduce GDP by hundreds of billions of dollars.

A Mercatus Center study also indicates that delaying reform could increase pressure on the US government bond market, as trust fund assets are invested in special US Treasury securities. This could potentially mean higher interest rates and more expensive mortgage, auto, consumer, and student loans.