The director of the Congressional Budget Office (CBO) disclosed on Tuesday that Social Security funds would start running out in 2032. This is one year than earlier estimations.
CBO Director Phillip Swagel said in reference to the 10-year period covered by the agency’s annual report that the “exhaustion date for the trust fund […] is now within the budget window.”
If Social Security funds become insolvent before any new changes in the law are made, then beneficiaries should expect to see a 20 percent reduction in their benefits.
The previous CBO’s update regarding the Social Security insolvency date had adjusted the projection to mid-December 2023. However, in this second update within the past two months, the projection has changed.
Swagel said that, in part, the reason for this new adjustment is the large cost-of-living adjustment (COLA) announced last year by the Social Security Administration. The 8.7 increase which took place in October was in response to the high inflation rates.
High inflation, however, is likely to have also led to high wage growth. As Social Security is taxing wages, the solvency may improve as wages increase.
Swagel did not provide any information on where the Medicare trust fund stands now. The current expectation is that it would shortfall in 2028.