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The Social Security trust fund for retirement benefits will run out of money in 2032, according to the latest estimate from the program’s trustees.

Last year, the trustees projected that the trust fund would be depleted in 2033. This year’s projection is a little more precise, estimating that the trust fund will last until the fourth quarter of 2032.

The estimates that make the headlines probably are optimistic. Deep in the trustees’ report are disclosures of the assumptions used to determine the deficit, and they look a bit hopeful to me. They probably understate inflation, among other arguable assumptions.

Also, the trustees reveal that if the system’s financial condition were computed the same way that pension funds are required calculate their liabilities, the deficit would be greater. That is disclosed on page 231 of the report.

The trustees report that several changes will cause the trust fund to be drawn down faster than was expected last year.

The Social Security program will receive less tax revenue because of the One Big Beautiful Bill Act enacted in 2025. The law created the senior tax deduction that reduces income taxes on the Social Security benefits of some recipients.

Also, less immigration and lower fertility rates are expected to reduce the program’s tax revenue.

The trustees projected that those factors will increase the long-term cost of the program.

Once the trust fund is exhausted, the system will continue to receive payroll and self-employment taxes each year. Those taxes are estimated to be enough to pay 78% of promised benefits.

That means there will be a 22% annual shortfall between the tax revenue and promised benefits, requiring an equivalent across-the-board reduction in benefits after the trust fund is depleted.

The annual cost of the program began to exceed its non-interest income in 2010. The cost has exceeded total annual income since 2021.

The shortfall between benefits and income essentially has been covered by the federal government’s general revenue.

That is because the trust fund’s only investments are special issue treasury bonds. Interest and principal payments on those bonds from the Treasury Department are used to ensure promised benefits are paid.

Policy analysts have issued various proposals to eliminate the deficit through a combination of tax revenue and benefit reductions. But Congress has taken little action despite years of warnings about the impending shortfall.

The longer Congress waits to act, the more probable it is that Congress will shift Social Security from a self-funded program to one in which most of the deficit will be covered by general funding from the government.

There would be no change in the government’s cash flow, since it already is funding the shortfall through payments on the special issue treasury bonds.

Some commentators are recommending that people take their benefits as soon as possible because of the shortfall. Recent surveys indicate that more people agree, reporting that they will claim benefits as soon as they are eligible at age 62.

I recommend against that strategy. Claiming benefits early results in an automatic reduction below full retirement benefits and from the maximum benefit that can be claimed by waiting until age 70.

If an across-the-board benefit reduction happens, it would be imposed on the benefits people are receiving at that time. Those who claimed benefits before full retirement age would receive an additional reduction in their benefits.