‘No vote, no warning, just simple arithmetic’: Social Security faces a possible automatic 22% reduction in about six years, and many Americans don’t know it

More than one in five Americans are unaware that Social Security payments could be reduced by roughly 20% in about six years, according to a recent TIAA survey on the program.

The retirement trust fund that finances benefits for retirees and survivors is projected to exhaust its reserves in the fourth quarter of 2032, according to the 2026 Social Security Trustees Report. After that point, payroll tax revenue would be enough to pay only 78% of scheduled benefits, creating an across-the-board 22% cut that would also affect people already receiving checks.

“Insolvency is a slightly misleading word for what the Trustees are projecting,” says Martin Mulyadi, YHB Endowed Chair in Accounting and Professor of Accounting at Shenandoah University. He points out that payroll taxes would still come in after 2032: “Social Security is not running out of money in 2032. It is running out of savings.”

The consequences would be substantial. Social Security sends monthly payments to more than 71 million people, and it supplies most of the income for 43% of seniors, according to AARP. The Committee for a Responsible Federal Budget estimates that a 22% reduction would cost a typical dual-income couple retiring in 2033 about $16,900 a year.

CRFB has described the program as being “on a collision course toward insolvency,” and Fortune has reported that its finances have not looked this weak since 1983. Concern increased after the trustees confirmed the 22% shortfall in June.

“America has a 25 trillion dollar problem,” says Michael Liner, a disability attorney and founder of Liner Legal, a law firm focused on Social Security disability benefits. He defines that problem as “the gap between what Social Security has promised and what it can actually afford to pay.”

The trustees now estimate that 75-year gap at $29.3 trillion in present value, up from $25.1 trillion in the previous report. If lawmakers do nothing, Liner says, the cut will happen automatically: “No vote, no warning, just plain math.” For many retirees, he adds, it would be “the difference between getting by or not.”

Why the retirement fund is running out

Social Security relies largely on payroll taxes. For decades, those taxes brought in more than the program paid out, and the surplus built reserves in two trust funds: the Old-Age and Survivors Insurance fund for retirees and survivors, and the Disability Insurance fund.

That changed in 2021, when the retirement fund’s expenses began to exceed its total income, according to the Congressional Research Service. Since then, reserves have been covering the difference.

“In 2025, Social Security took in about $1.45 trillion and paid out about $1.61 trillion, and reserves covered the gap,” Mulyadi says.

The disability fund is in stronger shape and is not projected to run dry over the next 75 years. If Congress were to legally combine the two funds, their pooled reserves would last until 2034 and then pay 83% of benefits, according to CRFB. But that would require a law change and would not eliminate the underlying funding gap.

Public confidence has weakened. In a June 2025 survey, only 36% of Americans told AARP they were confident in Social Security’s future, the lowest reading since 2010.

Demographics are a major reason. Social Security now supports roughly twice as many beneficiaries as it did in 1980, when about 35.5 million people collected benefits. Lower birth rates mean fewer workers are paying in, retirees are collecting benefits for longer periods, and reduced immigration has narrowed the pool of payroll-tax contributors.

Income inequality also matters. Payroll taxes apply only to earnings up to a cap, which is $184,500 this year, and high earners’ wages have risen faster than everyone else’s. The share of total wages subject to the tax has fallen from nearly 87% in 1984 to about 83% today, according to Roosevelt Institute research reported by CBS News.

“The Social Security trust fund is under strain because Congress has failed to update the program for the economy we actually have,” said Elizabeth Wilkins, CEO of the Roosevelt Institute, a progressive think tank. “Too much income now flows to the top, where it escapes Social Security taxation.”

Congress solved a similar crisis in 1983

The last time Social Security approached this kind of crisis, Congress stepped in. The 1983 amendments gradually lifted the full retirement age from 65 to 67 and, for the first time, subjected some benefits to federal income tax.

“We’ve had two instances in our history where it was suggested Social Security was going to go insolvent,” says Ernie Wingard, an advisor at Capital Choice Financial Group, “and in both of those instances, at the last minute, Congress was able to come to an agreement that saved it.”

That 1983 overhaul was intended to keep the program solvent for 75 years. If the retirement fund is depleted in 2032 as projected, the fix will have lasted about 50 years.

The possible fixes and their trade-offs

Lawmakers have several options. Proposals modeled in the American Academy of Actuaries’ Social Security Challenge tool and in Social Security Administration analyses include:

• Raising the full retirement age from 67 to 69.
• Increasing the payroll tax rate from 6.2% to 7.2% for both workers and employers.
• Raising the cap on taxable earnings, set at $192,300 for 2027, to a higher level such as $250,000 or $400,000.
• Using a different inflation measure to calculate the annual cost-of-living adjustment, which would slow benefit growth.

“Any fix has to close that gap through some mix of more revenue, such as a higher payroll tax rate or a higher cap on taxable earnings, and slower benefit growth, such as a later full retirement age or changes to the benefit formula,” Mulyadi says. “Each option has trade-offs, and the longer Congress waits, the larger each adjustment has to be.”

The debate is really about how to balance those choices. In a discussion covered by Fortune, two economists who disagreed about phasing out Social Security still agreed that wealthier Americans would need to contribute more. Treasury Secretary Scott Bessent, meanwhile, argued in June that stronger economic growth could help shore up the program without cutting benefits.

“This is absolutely something that can be fixed,” says Nancy LeaMond, AARP’s executive vice president and chief advocacy and engagement officer. “Congress has hundreds of tools in its toolbox to strengthen Social Security and fill that gap of 20 percent or so without cutting the payments that Americans have earned for a lifetime of hard work.”

“This should be a wake-up call: Congress needs to act,” AARP CEO Myechia Minter-Jordan said in a June statement. “Americans have worked hard and paid into Social Security their entire lives, and they deserve to count on it when they retire.”

Whatever solution lawmakers choose, they have only a limited window to decide.

How to prepare for a possible 22% cut

For households, Mulyadi suggests planning around a range rather than a single estimate. “Log in to your my Social Security account at ssa.gov, look at your projected benefit, and test your retirement budget at about 75 to 80% of it,” he says.

“If the plan still works, a cut is an inconvenience,” he says. “If it doesn’t, you still have time to save more, work a little longer, or rethink when to claim.”