A US Social Security check and calculator on a desk representing the 2027 COLA and Trust Fund picture

The Savvy Investor's Guide

Your 2027 Social Security check could be 4% bigger. Your 2032 check might be 24% smaller. Both are true.

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James Heppe-Smith

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Important Educational Disclaimer

This article is for educational and informational purposes only and does not constitute financial, tax, or investment advice. Social Security rules and projections are complex and subject to legislative change. Figures cited reflect the 2025 SSA Trustees Report (June 18, 2025) and subsequent analyses; the 2026 Trustees Report has not yet been published. The Savvy Investor Guide is an educational resource operated by The Savvy Investor Limited (UK Company No. 14816921) and does not provide regulated financial advice in the United States. Before making retirement planning decisions, consult a qualified registered investment adviser, certified financial planner, or other professional.

✓ Published May 20, 2026

Two things about Social Security are true at the same time. Your 2027 cost-of-living adjustment (COLA) could be approximately 4%, a meaningful improvement over the 2.5% you received in 2026. And the Old-Age and Survivors Insurance Trust Fund is now projected to be depleted by late 2032, at which point scheduled benefits would be automatically cut by approximately 24% absent congressional action. The two numbers feel contradictory but reflect different mechanics. The COLA tracks current-year inflation through a specific Q3 formula. The Trust Fund depletion reflects 75-year demographic and revenue projections. Both numbers are real. Both need to be in your retirement plan. Here is the picture as of May 20, 2026.

Update, May 23, 2026. Projections tightening and Waller adds an inflation-expectations dimension. Two updates from the May 22-23 window worth folding into the picture below:

  • 2027 COLA estimates converging upward. Since this article was drafted on May 20, the dominant estimate range has narrowed from the wider 2.8-4.2% spread to roughly 3.9-4.2%, with the Senior Citizens League holding 3.9% and Mary Johnson’s projection at 4.2%. The April CPI-W trajectory has firmed; the conservative early-year estimates (2.5%-3.2%) are now outside the prevailing range. The October 2026 official figure could still come in lower or higher, but a working planning assumption of approximately 4% for the 2027 COLA is now more defensible than the 3.5% midpoint suggested below.
  • Fed Governor Waller’s May 22 Germany speech adds an inflation-expectations angle. Waller said US one-to-five-year inflation expectations have moved up since the start of 2026, which he calls “concerning”, though longer-term expectations remain “relatively low and appear well anchored.” For COLA forecasting, the medium-term expectations drift matters: persistent higher headline inflation through Q3 2026 would lift the official 2027 COLA further, while also worsening the Trust Fund’s long-term funding gap. Every percentage point of additional COLA growth widens the actuarial deficit. Waller’s broader hawkish pivot, saying the Fed’s next move is “as likely to be a rate hike as a cut” and proposing to remove the “easing bias” language from the FOMC statement, is the clearest signal yet that the inflation backdrop is not normalising the way the 2024-25 cuts-cycle priced in. This compounds the Trust Fund pressure modelled below: higher near-term COLA combined with slower Fed support equals a more challenging mid-2030s than the 2025 Trustees Report’s baseline assumed. Waller speech text, Federal Reserve, May 22, 2026.

In short

  • 2027 COLA estimates currently range from 2.8% to 4.2%, with the Senior Citizens League at 3.9%, the Committee for a Responsible Federal Budget at 3.8%, independent analyst Mary Johnson at 4.2%, and more conservative outlets at 2.8-3.2%. The wide range reflects how April CPI-W data feeds into Q3 (July-August-September) projections. The official 2027 COLA will be announced in October 2026.
  • The 2025 SSA Trustees Report (June 18, 2025) projected the OASI Trust Fund to be depleted in 2033, with the combined OASDI projected to deplete in 2034 and able to pay only 81% of scheduled benefits at that point.
  • The One Big Beautiful Bill Act (July 4, 2025) accelerated OASI depletion to late 2032 per CRFB analysis. Medicare HI (Part A) Trust Fund depletion pulled forward to mid-2032. The acceleration is driven by OBBBA’s Senior Deduction ($6,000 above-the-line per individual 2025-2028) reducing taxable income and therefore the taxation of Social Security benefits that feeds the Trust Fund. Net revenue loss approximately $30 billion per year.
  • At 2032 depletion, scheduled benefits would be cut to approximately 76% of currently-scheduled amounts (a 24% automatic across-the-board cut) absent congressional action. Benefits would not stop; SSA would pay proportionally from incoming payroll tax revenue.
  • For a current average retired worker receiving $2,071 per month, a 24% cut would mean approximately $497 less per month, or about $5,964 less per year. For a couple receiving $3,208 per month, the cut would be approximately $770 less per month, or about $9,240 less per year.
  • The 75-year actuarial deficit is now 3.82% of taxable payroll, up from 3.50% in 2024. Present-value funding gap approximately $26 trillion (CRFB), or 1.3% of GDP. The deficit deteriorated by 0.32 percentage points of payroll vs. the 2024 report, largely due to the Social Security Fairness Act (signed early 2025) which added 0.14pp by partially restoring pension benefits for state and local public-sector workers.
  • 2026 IRMAA Part B brackets are now in effect: $202.90 standard monthly premium, with surcharges starting at MAGI above $109,000 single / $218,000 joint. 2027 brackets will be set Q4 2026.
  • 2026 earnings limits for those who claim early: $24,480 for workers under Full Retirement Age (FRA) for the full year ($1 withheld for every $2 above); $65,160 in the year you reach FRA ($1 for every $3). No earnings limit at or after FRA.
  • Reform proposals in Congress: Senator Sanders’ Social Security Expansion Act (S.770) raising payroll tax to wages above $250,000; the Fair Share Act applying payroll tax at $400,000 and to investment income; the CRFB-backed Six Figure Limit capping maximum benefits at $100,000/year. No bill has floor votes scheduled as of May 2026. Historical precedent (1983 reform) suggests action near the crisis point.

The good news first: 2027 COLA

Cost-of-living adjustments to Social Security benefits are calculated using a specific formula: the percentage change between the average Q3 (July, August, September) CPI-W of the current year and the prior year’s Q3 average. The Bureau of Labor Statistics publishes September CPI-W in mid-October, and SSA announces the COLA shortly after, applied to benefits starting in January of the following year.

For the 2027 COLA, the relevant data window is Q3 2026 CPI-W. As of May 20, 2026, we have April CPI-W at 3.9% year over year, which is the highest reading in over a year (the broader US headline CPI-U printed at 3.8% on May 13). The May, June, and Q3 readings will determine the actual 2027 COLA, which will be announced in October 2026.

Current estimates from the major forecasters vary by 1.4 percentage points, which is a wide range at this stage of the calculation cycle:

  • Senior Citizens League (Mary Johnson): 4.2% — based on the April CPI-W trajectory and an assumption that inflation stays elevated through Q3.
  • Senior Citizens League (alternate): 3.9% — averaged across early-2026 CPI-W readings.
  • Committee for a Responsible Federal Budget: 3.8% — projection based on April CPI-W with moderate assumptions about Q2-Q3 trajectory.
  • 401k Specialist (updated): 2.8%-3.2% — more conservative inflation path assumption.
  • Yahoo Finance (early): 2.5% — early-2026 estimate before the April acceleration.

Historical precedent matters here. May estimates have been unreliable: the 2022 COLA was estimated at ~7% in May and came in at 8.7% in October. The 2023 COLA was estimated at 3-4% in May and came in at 3.2%. The 2024 COLA was estimated at 2.5-3% in May and came in at 2.5%. The 2025 COLA was estimated at 2-3% in May and came in at 2.5%. A 1.0 to 1.5 percentage point swing between the May estimate and the October official is common.

For planning purposes, a working assumption of 3.5% for the 2027 COLA is reasonable as a midpoint of the current range. The official figure may be higher or lower; do not lock in any specific number until October 2026.

Now the bigger story: the Trust Fund

The 2025 Social Security Trustees Report was published on June 18, 2025. It is the most recent comprehensive primary-source assessment of the program’s long-term financial position. The 2026 Trustees Report has not yet been released as of May 2026; analyses since June 2025 (notably CRFB’s post-OBBBA work) update the 2025 figures rather than supersede them.

OASI Trust Fund

The Old-Age and Survivors Insurance Trust Fund pays retirement benefits to retired workers, spouses, and survivors. The 2025 Trustees Report projected OASI depletion in 2033, unchanged from the 2024 report. At depletion, the program would be able to pay approximately 77% of scheduled benefits from incoming payroll tax revenue. The remaining 23% is the funding gap that closes through some combination of revenue increases and benefit reductions.

The CRFB’s post-OBBBA analysis (covering the One Big Beautiful Bill Act signed July 4, 2025) pulled the OASI depletion forward to late 2032, approximately six months earlier than the June 2025 projection. The acceleration is driven by OBBBA’s Senior Deduction provision ($6,000 above-the-line per individual for tax years 2025 through 2028, with phase-outs starting at $75,000 MAGI single and $150,000 joint), which reduces the taxation of Social Security benefits. Tax on Social Security benefits is one of the revenue streams that funds the Trust Fund; reducing that taxation pulls revenue forward to the working-age senior population and reduces the Trust Fund’s incoming flow by approximately $30 billion per year.

At late-2032 depletion, the projected benefit-payout rate would be approximately 76% of scheduled benefits, or a 24% automatic across-the-board cut. Benefits would not stop; the program would continue to pay benefits in real time from incoming payroll tax revenue. The cut would persist until Congress acts.

Combined OASDI Trust Funds

OASDI is the combined Old-Age, Survivors, and Disability Insurance program. The 2025 report projects combined depletion in 2034, one year earlier than the 2024 projection of 2035. At combined depletion, benefits would be payable at 81% of scheduled amounts, declining to 72% by 2099.

The Disability Insurance Trust Fund on its own is projected solvent through the full 75-year window, with a +0.12% actuarial surplus (compared to a 0.31% shortfall in 2015 — DI has improved substantially over the past decade). The combined OASDI projection assumes a legal reallocation that lets DI revenue support OASI in the depletion window; absent that reallocation, OASI runs out earlier than OASDI does.

The 75-year actuarial deficit

The Trustees Report quantifies the long-range funding gap as 3.82% of taxable payroll over a 75-year window. This is the largest deficit since the early 1980s (the period leading to the 1983 Greenspan Commission reform). In dollar terms, the present-value funding gap is approximately $26 trillion (CRFB) or $25 trillion (Bipartisan Policy Center), representing approximately 1.3% of projected GDP over the window.

The deficit deteriorated by 0.32 percentage points of payroll vs. the 2024 report. The single largest driver of the year-over-year deterioration was the Social Security Fairness Act (signed early 2025), which adds approximately 0.14 percentage points to the long-term shortfall by partially restoring Windfall Elimination Provision and Government Pension Offset reductions. The Fairness Act benefits affected workers immediately (a popular and arguably overdue correction) but at a measurable cost to long-term Trust Fund solvency.

To restore 75-year solvency through immediate action, the Trustees Report indicates the following equivalent levers: (a) a payroll tax increase of approximately 29% (from 12.4% to 16.0% combined employer-employee); or (b) an immediate 22% benefit reduction; or (c) a 27% benefit reduction applied to new beneficiaries only. None of these is politically realistic in isolation. Any deal will combine multiple smaller adjustments.

What 2032 depletion would mean in dollar terms

The headline “24% automatic cut” is abstract. The dollar impact is concrete. Using the Social Security Administration’s 2026 average benefit data:

  • Average retired worker: Currently receives approximately $2,071 per month, or $24,852 per year. A 24% cut produces a reduction of approximately $497 per month, or $5,964 per year. The new monthly benefit would be approximately $1,574, or $18,888 per year.
  • Average retired couple: Currently receives approximately $3,208 per month, or $38,496 per year. A 24% cut produces a reduction of approximately $770 per month, or $9,240 per year. The new monthly benefit would be approximately $2,438, or $29,256 per year.
  • Higher-earning retired worker (e.g., maximum benefit at FRA, approximately $4,018 per month in 2026): A 24% cut produces approximately $964 per month, or $11,575 per year less.

Fortune’s analysis of the depletion scenario estimates that 16 million current and projected retirees would be pushed over the federal poverty line by a 23-24% automatic cut, with low-income and minority retirees disproportionately affected. The political pressure to avoid this outcome is significant; whether Congress acts before 2032 or only afterward is the open question.

What you can do about it depends on your age

The right planning response varies by where you are in the working-and-retirement timeline.

If you are 45 today (planning to retire around 2047)

You will reach 67 well after the projected 2032 depletion. By the time you claim benefits, Congress will almost certainly have acted (the 1983 reform passed with approximately 12 months to spare; precedent suggests action near the crisis). The form of the action matters more than the question of whether it happens.

The realistic planning assumption is that some combination of three things will be true by 2047: (a) the payroll tax cap will have been raised (Sanders S.770 at $250k or Fair Share Act at $400k); (b) the Full Retirement Age may have been raised by 1-2 years; (c) benefits for newer cohorts (your cohort) may be modestly reduced. None of these alone closes the 22-27% gap; a combination will.

For your retirement plan, model Social Security at approximately 75-80% of your Social Security statement projection. If your statement says you would receive $3,000 per month at FRA in 2047, plan as if you will receive $2,250-$2,400. The gap is what your private retirement savings need to close. This is more conservative than most legacy retirement planning frameworks, which assumed 100% benefit delivery. Today’s data makes the 75-80% assumption the more defensible base case.

If you are 60 today (planning to claim at 67 or 70)

You reach 67 in 2033 and 70 in 2036. This places your first benefit checks in the depletion window. The structural risk is that if Congress has not acted by late 2032, your first checks may arrive at the reduced 76% rate.

Claiming at 70 does not protect you against the statutory cut, because the cut would apply across all beneficiaries proportionally. The benefit of delayed claiming (the 8% per year delayed retirement credit) still applies; if scheduled benefits are cut by 24%, the delayed-claim benefit is also cut by 24%, leaving the relative advantage of delay intact but the absolute dollar amount reduced.

For your retirement plan, model two scenarios in parallel. Scenario A: full scheduled benefit (Congress acts before depletion). Scenario B: 76% of scheduled benefit (no congressional action). Build the plan around Scenario B; treat Scenario A as upside.

Specifically: ensure your portfolio plus pension plus reduced Social Security covers your expected retirement expenses. If the gap requires you to work an additional year or two before claiming, factor that in now while you still have flexibility. The 60-67 window is the highest-leverage period for retirement plan adjustments; the levers narrow rapidly after 67.

If you are already drawing benefits

Nothing changes your current benefit. The 2027 COLA will apply to your current benefit at whatever percentage the October 2026 announcement specifies. Your 2032 exposure depends on whether you are still drawing then and whether Congress has acted.

The practical planning posture for current retirees: build a reserve of 2-3 years of the potential shortfall amount in accessible savings (high-yield savings, short-duration Treasury bills, I-bonds — see our I-bonds piece). For a couple receiving $3,208 per month, the potential 24% shortfall is approximately $9,240 per year; a 2-3 year reserve at that level is approximately $18,000 to $28,000 in accessible cash on top of the rest of the retirement plan. This is a reasonable insurance reserve against the depletion scenario.

Diversifying retirement income beyond Social Security (private pension annuitisation where available, dividend-paying portfolios, rental real estate, tax-efficient withdrawal sequences) reduces Social Security dependence. For most retirees, Social Security currently accounts for around 30-40% of total retirement income. A 24% cut to that share reduces total retirement income by approximately 7-10%. That is meaningful but absorbable for households with a sound non-Social-Security retirement plan.

2026 Medicare IRMAA brackets

Medicare Part B premiums in 2026 follow the income-related monthly adjustment (IRMAA) structure based on 2024 modified adjusted gross income (the standard two-year lookback). The 2026 standard Part B premium is $202.90 per month.

The 2026 IRMAA tiers (single filer / married filing jointly):

  • Tier 1 (no surcharge): MAGI ≤$109,000 single / ≤$218,000 joint. Premium $202.90/month.
  • Tier 2: MAGI $109,001-$138,000 / $218,001-$276,000. Premium $284.10/month (+$81.20 surcharge).
  • Tier 3: MAGI $138,001-$168,000 / $276,001-$338,000. Premium ~$365/month (+$162.10).
  • Tier 4: MAGI $168,001-$206,000 / $338,001-$412,000. Premium ~$446/month (+$243.10).
  • Tier 5: MAGI $206,001-$750,000 / $412,001-$750,000. Premium ~$527/month (+$324.00).
  • Tier 6 (top): MAGI >$750,000 (single or joint). Premium $689.90/month (+$487.00).

Part D (prescription drug) IRMAA adds $14.50-$91.00/month on top of the plan premium, in tiers parallel to Part B.

The 2027 IRMAA brackets will be set in Q4 2026 based on 2025 income data. A one-time capital gain, Roth conversion, or required minimum distribution in 2026 can push a household into a higher 2028 IRMAA bracket; this is sometimes called the “IRMAA cliff” and is a common consideration in late-career tax planning.

2026 earnings limits (if you claim before FRA)

If you claim Social Security before your Full Retirement Age (currently 67 for workers born 1960 or later) and continue to work, an earnings test applies:

  • Under FRA for the entire year: $24,480 annual limit in 2026; $1 in benefits withheld for every $2 earned above the limit. Withheld benefits are not lost permanently; they are added back via a recalculation when you reach FRA.
  • Year you reach FRA: $65,160 limit (counted only for months before your FRA birthday); $1 withheld for every $3 above. No earnings limit applies from the FRA month onward.
  • At or after FRA: No earnings limit. You can earn unlimited wages while collecting full benefits.

The earnings test matters for early claimers who continue working. For most workers, the structural advice has not changed: delay claiming until FRA or beyond if you can afford to, both to maximise the benefit and to eliminate the earnings test entirely.

Reform proposals: what is on the table

Several specific reform proposals have been introduced in the 119th Congress. None have floor votes scheduled as of May 2026. The political reality is that Social Security reform requires bipartisan agreement; the historical pattern (1983 reform) suggests action near the crisis point rather than years in advance.

Revenue-side proposals

  • Social Security Expansion Act (S.770) — Sen. Sanders and Sen. Warren. Applies payroll tax to wages above $250,000 (current wage base is $184,500 in 2026; wages from $184,501 to $249,999 would remain exempt under this proposal). Sponsors project benefits would increase by approximately $2,400 per year and the program would be funded for 75 years.
  • Medicare and Social Security Fair Share Act — Applies payroll tax at the $400,000 threshold and also applies to investment income. Broader base than S.770.
  • Six Figure Limit (CRFB concept, March 2026) — Caps maximum Social Security retirement benefit at $100,000 per year per couple at Normal Retirement Age. Reduces high-earner benefits without affecting middle and lower-income beneficiaries.

Benefit-side proposals

  • Means-testing — Reduce benefits for households with MAGI exceeding $60,000 single / $120,000 joint. Politically unpopular; no specific bill with broad support.
  • Raise Full Retirement Age — Discussed in policy circles (FRA from 67 to 68 or 69) but no specific legislative vehicle with current momentum.

Any final deal will likely combine multiple smaller adjustments rather than rely on any single lever. The 2032 deadline is now sufficiently close that policy attention is rising; expect more legislative activity in 2027-2030.

FAQ

Should I claim Social Security early because of the 2032 risk?

Generally no. The 8% per year delayed retirement credit between FRA (67) and age 70 is one of the highest-return investments most retirees have access to. The 24% potential automatic cut would apply across all beneficiaries proportionally — claiming early does not insulate you from it. Claiming early permanently locks in a lower benefit base, and that lower base would still be cut by 24% in the depletion scenario. The mathematics favour delayed claiming for most healthy individuals; the 2032 risk does not change that.

What if I’m worried about benefit cuts and want to act now?

Three actions are within your control: (1) maximise tax-advantaged retirement savings (401(k), IRA, HSA) to reduce reliance on Social Security; (2) plan to delay claiming until at least FRA, ideally to 70, both to maximise the benefit and to optimise tax-bracket positioning in retirement; (3) build a non-Social-Security retirement income stream (dividend portfolio, rental income, annuitised pension) that covers your essential expenses, treating Social Security as marginal rather than primary income. These steps are sensible regardless of the depletion timeline and become more valuable if the cut materialises.

Has Social Security ever actually been cut before?

In nominal terms, no. The 1983 reform raised the FRA from 65 to 67 (phased in over decades), increased payroll taxes, and started taxing benefits for higher-income retirees, but did not cut nominal benefits. The 2032 depletion scenario would be the first nominal cut in the program’s history. Whether Congress allows that to happen is the political question. Historical precedent suggests they typically do not, but the political dynamics in the late 2020s and early 2030s will determine the outcome.

What does the Social Security Fairness Act do?

Signed in early 2025, the Fairness Act eliminated or substantially reduced the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) — provisions that had reduced Social Security benefits for workers who also received non-covered pensions (typically state and local government pensions, including some teachers and firefighters). The Act benefits an estimated 3 million affected workers but adds approximately $200 billion in costs over 10 years and 0.14 percentage points of payroll to the long-term shortfall. The Trust Fund acceleration is the price of the Fairness Act benefits.

Will my Social Security still be paid in 2033 or 2034 if Congress doesn’t act?

Yes, benefits would continue to be paid, but at a reduced rate. Approximately 76-77% of scheduled benefits would be payable from incoming payroll tax revenue. SSA would not have legal authority to pay full scheduled benefits without congressional action. The cut would be automatic and would persist until reform legislation is enacted. This is different from a benefit suspension; checks continue, but smaller.

How does the EBRI Retirement Confidence Survey relate to this?

The 2026 EBRI survey published April 22, 2026 identified Social Security and Medicare solvency as one of the top three drivers of declining US retirement confidence. The 2032 depletion timeline is a structural reason workers are less confident about retirement readiness than they were five years ago. See our EBRI 2026 piece for the broader retirement confidence context.

The Savvy Investor’s take

Both Social Security stories are true at the same time. The 2027 COLA could be 4%, which is a meaningful improvement for current retirees and helps offset four years of cumulative inflation since the 8.7% COLA of 2023. The 2032 depletion timeline is a serious structural risk that every worker under age 65 should factor into their retirement plan. Neither story makes the other less real; they coexist because they reflect different mechanics.

For most SIG readers, the practical posture is the same regardless of which story is in front of you in any given week. Build a retirement plan that does not depend on 100% of your Social Security statement projection. Use 75-80% as your working assumption for benefits arriving after 2032. Maximise tax-advantaged retirement savings while you can; the catch-up contribution rules (see our updated 401(k) Optimization Playbook) provide meaningful late-career savings room. If you are eligible for the Saver’s Match launching January 2027, plan to use it.

The political question of whether and when Congress acts to close the Trust Fund gap is genuinely uncertain. Reform proposals on the table range from payroll tax cap increases (S.770 at $250k, Fair Share at $400k) to benefit caps (Six Figure Limit at $100k per couple) to FRA increases. Historical precedent (1983) suggests Congress typically acts within 12-18 months of a crisis point rather than years in advance. The 2027-2030 window is when most of the policy work will likely happen.

Two pieces of context worth noting. The OBBBA’s Senior Deduction has materially affected the Trust Fund’s revenue base; whether that policy choice remains in force in future Congresses will affect the depletion timeline. And the Social Security Fairness Act’s cost (0.14 percentage points of payroll over the 75-year window) is the price of restoring benefits for state and local public-sector workers. Both decisions delivered benefits to specific groups at measurable cost to long-term Trust Fund solvency. The trade-offs are visible in the data even when they are not visible in the political discussion.

Information, not advice. This article describes Social Security Trust Fund projections from the 2025 SSA Trustees Report (published June 18, 2025) and subsequent analyses of the One Big Beautiful Bill Act (signed July 4, 2025), along with the 2027 COLA estimate range and 2026 IRMAA brackets as of May 20, 2026. It is not personal financial advice. Social Security rules are subject to legislative change. The 2026 SSA Trustees Report has not yet been published. For personal retirement planning, consult a qualified registered investment adviser, certified financial planner, or other professional.

Key sources

Fact-checked: 8 June 2026 · Last reviewed: 21 May 2026

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