Social Security Trust Fund Depletion Accelerates, 2027 COLA Forecasts Rise

The Social Security Administration's Office of the Actuary projects the Old-Age and Survivors Insurance (OASI) trust fund asset reserves will be depleted in the fourth quarter of 2032—one year earlier than previously forecast.

Concurrently, independent analysts have increased their estimates for the 2027 cost-of-living adjustment (COLA) for benefits, citing recent increases in energy prices.

Trust Fund Depletion and Financial Outlook

The Social Security Board of Trustees has reported a long-term funding obligation shortfall since 1985. The 2025 report estimates this 75-year unfunded obligation at $25.1 trillion.

The depletion of the OASI trust fund's asset reserves would not halt benefit payments, as the program can continue to pay benefits from incoming payroll tax revenue. However, it would indicate the current payout schedule is unsustainable, potentially leading to a reduction in monthly benefits. The Trustees Report projects that if no legislative changes are made, benefits could be reduced by up to 23% upon the fund's depletion.

An analysis links the accelerated depletion date to a tax and spending law enacted in July 2025. The Office of the Actuary projects this law will increase costs for the combined OASI and Disability Insurance trust fund by $168.6 billion from 2025 to 2034, due to reduced payroll tax income collected between 2025 and 2028.

Provisions in the law include:

• Increasing the standard deduction for eligible seniors aged 65 and over.
• Allowing eligible workers to deduct a portion of annual tips.
• Providing a partial deduction on overtime pay.

Analysts cite broader demographic trends as significant contributors to the program's long-term financial shortfall:

• The ongoing retirement of the baby boomer generation.
• Increased longevity among beneficiaries.
• A declining U.S. birth rate.
• Reduced net legal migration since the late 1990s.
• Income inequality, with a smaller percentage of total earned income subject to the payroll tax in 2024 (83%) compared to 1983 (90%).

2027 Cost-of-Living Adjustment Forecasts

The Social Security Administration announces the annual COLA each October, calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Early estimates for the 2027 COLA have risen following a significant increase in energy prices.

• The nonpartisan Senior Citizens League (TSCL) estimates the 2027 COLA will be 2.8%.
• Independent policy analyst Mary Johnson increased her forecast to 3.2%, up from a previous estimate of 1.7%.
• A 3% COLA would increase the average retired-worker benefit, which was $2,079.49 in March, by approximately $62 per month.

Analysts attribute the rise in COLA forecasts to increased energy prices following geopolitical events in February, when U.S. and Israeli military forces commenced attacks on Iran and Iran subsequently closed the Strait of Hormuz to most oil shipping traffic.

The 2026 COLA was 2.8%, which some analysts had previously attributed to price increases influenced by tariff and trade policies.

Social Security provides benefits to over 70 million individuals, including approximately 54 million retired workers. Surveys indicate a large majority of retirees rely on these benefits.

According to TSCL, the purchasing power of Social Security income declined by 20% between 2010 and 2024.

The group also states that the CPI-W may not fully reflect senior spending habits, which are weighted more heavily toward shelter and medical care. Increases in Medicare Part B premiums can also offset COLA gains for beneficiaries.