Social Security’s trust funds are inching closer to depletion as declining birth rates continue to shrink the pool of future workers who finance the system through their payroll tax contributions and increasing retirements among baby boomers expand the number of beneficiaries.

The Old Age and Survivor Insurance (OASI) Trust Fund, which pays for retirement and survivor benefits, is now expected to run out of money by the end of 2032, one quarter earlier than forecast in last year’s trustees report, the Social Security Administration announced on June 9, 2026. Full scheduled benefits cannot be paid once trust fund reserves are depleted. If Congress does not act before the end of 2032 to raise taxes, cut benefits or take other actions to stabilize the long-term financing of the nation’s crucial retirement system, benefits could be cut by 22% across the board beginning just six years from now.

The Trustees’ report recommends that lawmakers address the projected trust fund shortfalls in a timely way to phase in necessary changes gradually and give workers and beneficiaries time to adjust their expectations and behavior. Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits, the report said.

The 2026 Social Security Trustees report cited three factors responsible for the worsening of Social Security’s funding status, including two of the Trump administration’s key policies: lower taxes and lower immigration.

The combination of a lower projected fertility rate from 1.9 children per woman to 1.75 children per woman and lower immigration rates reduces the projected number of future workers, which would in turn reduce the amount of payroll tax collections to fund the Social Security program, the report said. In addition, the One Big Beautiful Bill Act (OBBBA) enacted on July 4, 2025, reduced ordinary income tax rates, adjusted tax brackets, and made permanent an increase in the standard deduction. Combined with a new temporary standard deduction for taxpayers 65 and older, the result is that the Social Security trust funds will receive lower levels of revenue in the future from taxation of Social Security benefits.

Social Security benefits are financed through payroll taxes, income tax on Social Security benefits, and interest earned on invested trust fund reserves. Payroll tax contributions consist of the 6.2% tax on gross earnings up to $184,500 in 2026. The tax is paid by both employees and employers for a combined tax rate of 12.4%. Self-employed workers pay the equivalent of the combined employer and employee tax rates. Earnings above that limit are exempt from Social Security taxes, but all earnings—even those above the maximum wage limit—are subject to a 1.45% Medicare tax, paid by both employees and employers, and a combined 2.9% rate by self-employed workers. Payroll taxes funded 91% of the Social Security program in 2025. Interest earnings on trust fund reserves accounted for 5% of program financing in 2025.

But payroll tax contributions and interest earned on the trust fund reserves are no longer enough to pay all promised Social Security benefits. Since 2021, the Old Age and Survivors Insurance trust fund has been drawing down reserves to finance benefits and will require increasing amounts of redemption of trust fund securities during the next decade until projected trust fund depletion in the fourth quarter of 2032.

Social Security beneficiaries with incomes above $25,000 for individuals and $32,000 for married couples filing jointly include up to 50% of their Social Security benefits in taxable income. Individuals with incomes above $34,000 and married couples filing jointly with incomes above $44,000 include up to 85% of their benefits in taxable income. The income thresholds are not indexed for inflation, meaning more beneficiaries pay income taxes on their Social Security benefits each year. However, the new higher standard deduction for taxpayers 65 and older, scheduled to expire after 2028, may temporarily halt that trend. Income taxes on Social Security benefits accounted for 5% of program financing in 2025.

At the end of 2025, 62.3 million people received retirement and survivor benefits, 8.2 million people received disability benefits, and 69.3 million people were enrolled in Medicare. An estimated 184.7 million people paid Social Security taxes last year and 188.7 million paid Medicare payroll taxes in 2025.