Social Security beneficiaries could face a 22% reduction in scheduled retirement benefits after 2032, according to the Social Security Board of Trustees’ annual report released Tuesday.

The trustees said the Social Security trust fund that pays retirement and survivor benefits is projected to exhaust its reserves in 2032. After that, incoming payroll tax revenue would be sufficient to cover only 78% of scheduled benefits.

The report affects a program that provides monthly benefits to more than 70 million Americans, including retirees, people with disabilities and surviving family members.

The trustees attributed the worsening outlook in part to demographic trends. Among the changes in this year’s projections, the report lowered its assumption for the U.S. fertility rate to 1.75 births per woman from 1.9 previously and cited lower expected immigration levels, both of which could reduce future payroll tax collections.

Calls For Action

The Social Security Administration emphasized that insolvency would not mean benefits disappear entirely. Instead, payroll tax revenue would continue funding a portion of scheduled payments after the trust fund’s reserves are depleted.

According to CBS News, Nancy Altman, president of Social Security Works, said benefit reductions would create significant financial hardship for retirees and disabled Americans, while AARP CEO Dr. Myechia Minter-Jordan called the report a “wake-up call” and urged Congress to act to protect benefits.

The report arrives weeks after AARP warned that rising living costs are increasing Americans’ reliance on Social Security income and urged lawmakers to strengthen the program ahead of the funding deadline.

Separate analysis from the Committee for a Responsible Federal Budget estimated beneficiaries could see average monthly checks reduced by about $500 if the trust fund reaches insolvency without congressional action. The group said the reduction would amount to roughly 24% of average benefits.

Medicare Outlook

The trustees also reported that Medicare’s Hospital Insurance Trust Fund is projected to become depleted in the second quarter of 2033, slightly earlier than previously expected.

After depletion, Medicare would be able to pay approximately 89% of scheduled benefits, according to the report.

Michael A. Peterson, CEO of the Peter G. Peterson Foundation, warned that automatic reductions in Medicare provider payments could eventually contribute to disruptions in care or higher healthcare costs for patients.

Recent polling suggests Americans are concerned about Social Security’s finances but remain divided on how to address the problem. A Reagan Institute survey released in May found that most respondents opposed proposals such as raising payroll taxes, increasing the retirement age or reducing benefits, making it politically difficult for lawmakers to pursue reforms.

Disclaimer: This content was produced with the help of AI tools and was reviewed and published by Benzinga editors.

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