The Social Security Administration’s (SSA) Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement benefits, is now projected to run out of reserves in the fourth quarter of 2032, one quarter earlier than last year’s projection. SSA Chief Actuary Karen P. Glenn discussed the findings from the 2026 Social Security Trustees Report and potential pathways to solvency during a June 12 event hosted by the American Enterprise Institute (AEI).
Meanwhile, bipartisan legislation announced June 15 would establish an independent commission to address long-term solvency.
Report findings
According to Glenn, the worsening long-term outlook and the earlier OASI depletion date were driven by several key changes in the report’s assumptions. The most significant, she said, was a reduction in the assumed total fertility rate from 1.90 to 1.75 children per woman, reflecting recent low birth rates and societal changes. The projections also assume lower levels of net immigration and incorporate the effects of last year’s One Big Beautiful Bill Act.
These factors contributed to a change in the long-range actuarial balance measure, which Glenn described as “the amount of extra taxes we would need … to keep us solvent over the next 75 years, and give us a one-year cushion.” That measure “increased significantly this year,” she said. “It was 3.82% in last year’s report, and we’re now at 4.42%.”
While the OASI fund’s depletion date moved up, the depletion date for the combined OASI and Disability Insurance (DI) trust funds remains the third quarter of 2034. “That’s the same as we saw in last year’s report, and that’s due to some offsetting factors,” Glenn said, noting that an improved near-term economic outlook counteracted other negative pressures. The DI trust fund, as in last year’s report, is projected to remain solvent for the next 75 years.
Options for maintaining solvency
Glenn also outlined the choices lawmakers face in addressing the OASI shortfall. She described the current scenario as “a simple math problem” but “not a simple political problem.” If no action is taken, only about 78% of scheduled OASI benefits would be payable when the fund’s reserves are depleted in 2032.
To close the gap, Glenn reviewed several policy options that Congress could consider, which generally fall into two categories — lowering program costs or increasing revenue. Congress also could employ “some combination of the two,” she said.
Ways to lower costs include:
- Increasing the normal retirement age. This would lower OASI costs but could slightly increase DI costs.
- Lowering benefits for high earners. This could be done by reducing the Primary Insurance Amount (PIA) above a certain earnings level.
- Reducing the cost-of-living adjustment (COLA). Glenn said this could be achieved by using the chain-weighted CPI but noted the greatest impact would be on the oldest beneficiaries.
Ways to increase revenue include:
- Raising the payroll tax rate. The current combined rate is 12.4%, said Glenn, but increasing that rate by 4.42% “would make the program solvent over the next 75 years.”
- Increasing the “taxable maximum.” This would involve increasing the maximum amount of earnings subject to the Social Security tax or eliminating the cap entirely.
- Taxing other income. Glenn cited taxing group health insurance premiums or investment income as possibilities.
- Investing the trust funds in higher-yielding investments. However, Glenn explained that this option would “potentially increase risk.”
Bill would establish commission
Days later, Representatives Tom Suozzi (D-NY) and Tom Cole (R-OK) announced a bill, H.R. 9187, that would establish a bipartisan, bicameral commission to study pathways to solvency.
The proposed commission would have 13 members, including two non-elected experts, according to a press release. The commission would be required to provide a report to Congress within one year of formation.
“[T]he solvency of Social Security is at a critical point, and millions of Americans who have paid into this program throughout their working lives may not receive the money they deserve,” said Cole. “Therefore, doing nothing on Social Security is not an option.”
Experts weigh solvency options
AEI’s Andrew Biggs provided context for the policy debate. The current trust fund challenges are “well-understood,” he stressed. “What the trustees or the actuaries are showing for the Social Security program today is really, very consistent with what they projected for the program 25 years ago.”
Biggs, however, called attention to what he described as a shift in the adequacy of benefits. “As our retirement system outside of Social Security has improved, higher benefits do less to increase seniors’ total retirement incomes, and more they serve to replace savings that would have taken place anyway,” said Biggs. “That’s particularly true as you go higher up in the earnings distribution,” he added. He described higher earners paying into Social Security while simultaneously saving for retirement, suggesting “those are increasingly going to be substitutes for one another.”
Biggs also contrasted the role of the DI fund, which he said serves “an essential need for one of the most vulnerable parts of the population,” with that of the OASI fund, suggesting that “paying increasingly high benefits to increasingly rich retirees may be less essential.”
AEI’s Mark Warshawsky released a working paper earlier this year proposing another approach to OASI solvency — incorporating a means test similar to that of Australia’s pension system. Under this approach, cuts would be limited to those with an individual net worth exceeding a set threshold — with a “reduction factor” applied for every $1,000 in net worth above the threshold. Warshawsky posits that net worth is a better measure than assets, because it accounts for loans and mortgages that must be paid.
While a net worth means test would be “challenging to administer,” says Warshawsky, he notes that “[t]he Australian experience clearly shows it can be done, with sufficient notice and planning.”
Warshawsky also recommends the cuts be age-limited, applying only for those ages 62 to 74 who receive retirement or widow benefits. He suggests this population “can adapt more easily than older individuals, with the younger retirees continuing or even returning to the labor force if necessary.”
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