Social Security’s Trust Fund Runs Dry in 2032 and the Automatic Cuts Would Cost a Typical Couple $18,400 a Year

The future is not looking good for retirees who depend on Social Security. The One Big Beautiful Bill Act reduced the tax revenue going to the program, which was already facing funding shortfalls. The result is that the Congressional Budget Office (CBO) now projects that the Social Security trust fund is expected to run dry in fiscal year 2032. 

This is earlier than the trustees warned about in the most recent report. Retirees also face a huge benefit cut if Social Security’s trust fund runs out. The Social Security Administration could only pay benefits out of revenue collected from current workers. As a result, the CBO projects that automatic benefit cuts triggered by a shortage would cost the typical couple $18,400 per year in Social Security income. 

That’s a lot of money to lose. So, the big question is, what’s the likelihood of this happening, and what should seniors do about this difficult situation?

Is an automatic Social Security benefit cut coming in 2032?

The CBO’s data is pretty clear that a major cut to benefits is going to become a reality very soon. Now, lawmakers could — and probably will — try to prevent that from happening, but stopping these cuts is harder than it seems. 

Lawmakers would need to make some changes to Social Security’s funding mechanism or to retirement benefits to prevent cuts from happening.

It’s possible that they could prevent benefit cuts by raising Social Security taxes collected. However, with the Republican Party in control of the government, a huge tax increase seems unlikely.

Raising taxes is also complicated by the fact that Social Security is an earned benefit. This means you receive retirement checks based on the taxes you pay in. Charging people higher taxes and giving them a resulting increase in benefits wouldn’t fix the program’s financial woes. But decoupling benefits from taxes paid  by charging more tax without a resulting increase in benefits would result in Social Security no longer being an earned benefit. This could put the program at risk. 

Other options to fix the issue include reducing monthly benefits either directly or with a de facto benefit cut, like slowing down the rate at which Social Security adjusts upward for inflation, or changing the full retirement age so seniors have to wait longer to claim full benefits. These ideas are very unpopular and arguably go against President Trump’s pledge not to cut Social Security benefits.

Unfortunately, the longer lawmakers wait, the greater the declines in the trust fund’s reserves, and the more drastic the solution would need to be to fix the problem. So, while it’s likely lawmakers aren’t going to let a huge Social Security cut happen, preventing this from happening is also really hard. 

What should retirees do about impending Social Security benefit cuts?

So, what should retirees do about impending benefit cuts? One option is to try to wait to claim Social Security as long as possible. If you delay your benefits claim, you lock in a larger benefit. Since cuts would probably happen on a percentage basis, starting from your current payment amount, maxing out your monthly Social Security would leave you with more money left over even after a reduction occurs. 

Seniors should also try to save money in case a big benefit cut does happen. The more retirees have in reserve, the better they will be able to withstand a reduction in their Social Security check. A financial planner can offer help with this process and work with seniors to understand how much they should be saving and investing for an uncertain future.