Social Security’s Shortfall Now Looks Smaller, But Your Check Could Still Shrink

Pressure is on Congress to find a solution to the Social Security program’s looming financial shortfall and preserve senior benefits. One proposed solution involves changing the Social Security payroll tax to help fill in that gap. A Congressional Budget Office (CBO) estimate projects the OASI deficit to be a relatively small 4.55% of taxable payroll shortfall, but the Cato Institute is warning that the projection might be too optimistic, and the actual shortfall might be more significant.

Here’s what you should know about the Social Security shortfall and how your benefits might be impacted.

Get a protection plan on all your appliances

Did you know if your air conditioner stops working, your homeowner’s insurance won’t cover it? Same with plumbing, electrical issues, appliances, and more. 

A home warranty from Choice Home Warranty could pick up the slack where insurance falls short. 

For a limited time, you can get your first month free with a Single Payment home warranty plan. 

Several projections indicate the Social Security program is in financial trouble. The Social Security Trustees’ 2026 report projects that the Old-Age and Survivors Insurance (OASI) trust fund may be depleted by the fourth quarter of 2032, which is one quarter earlier than the 2025 report projected. If the OASI trust fund becomes depleted, the program’s income may only be sufficient to pay 78% of total scheduled benefits, and an automated 22% benefits reduction may be applied.

The CBO’s September forecast includes a projection that the OASI faces a shortfall of 4.55% of its taxable payroll. That matches the Social Security Administration’s (SSA) projection earlier this year indicating that the program faces a shortfall of 4.55% of taxable payroll.

Shopping for cheaper auto insurance? Enter your zip code here to get started.

Several factors are potentially making the projections deceiving. The Cato Institute, a libertarian public policy research organization, has analyzed these figures and is warning that the 4.55% taxable payroll estimate may be too optimistic. Though the SSA and CBO projections match, the CBO has previously projected a larger long-term shortfall than the SSA.

The Cato Institute’s analysis found that the decline in the CBO’s estimate reflects the impact of higher projected interest rates. Those higher interest rates change the future shortfall, and the resulting figure seems to suggest that the shortfall has shrunken. In fact, that gap hasn’t actually become any smaller.

According to the Cato Institute, Social Security’s long-term shortfall may be even worse than projected because of fertility rates. The 2025 Social Security Trustees’ report estimated that Social Security faces a 75-year funding shortfall of approximately $27 trillion in today’s terms.

“But those projections rely on unusually optimistic assumptions about future US fertility rates,” the Cato Institute writes. “The Trustees are likely understating Social Security’s insolvency problem by assuming Americans will start having far more children than current trends suggest.”

If you’re over 50, take advantage of massive discounts and financial resources

Over 50? Join AARP today— because if you’re not a member you could be missing out on huge perks. When you start your membership today, you can get discounts on things like travel, meal deliveries, eyeglasses, prescriptions that aren’t covered by insurance and more.

Start your membership by creating an account here and filling in all of the information (Do not skip this step!) Doing so will allow you to take up to 25% off your AARP membership, making it just $15 the first year with auto-renewal.

According to the Cato Institute, if fertility trends follow the CBO’s projections, the Social Security deficit could reach at least $30 trillion. It’s possible that by using unusually optimistic fertility rate projections, the SSA might be underestimating the gap in Social Security’s funding by at least $3 trillion in today’s terms.

Even the Census’s and CBO’s fertility projections might be optimistic, cautions the Cato Institute. The estimates both assume that long-term fertility rates plateau at 1.53 to 1.56, but fertility has declined in the U.S. for two decades. There’s no evidence that the decline may stop soon.

The 4.55% taxable payroll gap holds meaning if Congress decides to address the Social Security funding shortfall by implementing a payroll tax increase. In that instance, Congress would need to raise the current 12.4% Social Security payroll tax rate by 4.55 percentage points to close that gap. The resulting payroll tax would be 16.95%.

The Cato Institute has calculated that if the tax is increased to 16.95%, an individual earning about $60,000 per year would pay $2,730 more in payroll taxes, bringing their total tax burden to $10,170. If the individual is traditionally employed, their employer would be responsible for half of the Social Security tax.

Raising Social Security payroll taxes is just one proposed reform to address the program’s funding gap. Congress is also exploring options like raising the full retirement age at which point individuals may claim full Social Security benefits. Currently, the full retirement age is 67 for individuals born in 1960 or later, and proposals have suggested raising that age to 70.

Instead of raising taxes for everyone, Congress also has the option to remove the payroll deduction cap. In 2026, Social Security taxes only apply to the first $184,500 an individual earns in the year. That means that high earners whose incomes exceed that amount only pay taxes on part of their income. Removing the cap could allow the Social Security program to receive substantial additional revenue.

Retirement News: Almost 80% of Americans fear a retirement age increase — here’s the real reason why

The conflicting projections bring mixed information about the program’s financial shortfall, but all of the projections agree that a shortfall is imminent. If Social Security is only able to pay 78% of scheduled benefits and those benefits are reduced by 22%, the average married couple might lose about $10,560 per year in benefits, according to the Bipartisan Policy Center Action. Regardless of which projection proves right, delaying action on solving the funding issue only narrows the options that lawmakers may ultimately have left.

This may be a good time to stress-test your retirement plan to see how you could get by on reduced benefits, just in case a reduction actually happens.

Almost 80% of Americans Fear a Retirement Age Increase — Here’s the Real Reason Why By FinanceBuzz Editors 10 Smart Money Moves to Retire Stress Free By FinanceBuzz Editors The Easiest Way to Diversify Your Investment Portfolio With Fine Art By FinanceBuzz Editors 7 Brilliant Ways to Build Wealth After 40 By FinanceBuzz Editors 5 Ways Seniors Are Throwing Away Money By FinanceBuzz Editors Best High-Yield Savings Accounts of October 2026, Compared By FinanceBuzz Editors Save Money and Get Huge Discounts on Everyday Purchases AARP Benefits Huge discounts on travel, groceries, prescriptions and more Access to financial planning resources and health tools Join AARP and get 25% off with automatic renewal Become a member now!

From high-yield savings accounts to cashback checking and sign-up bonuses, we bring you the best banking offers to grow your money smarter.

Retirement Dave Ramsey Encourages Retirees to Collect Social Security at 62 – 7 Pros and Cons ->

11 Kinds of Income Retirees Can Collect Without Losing Social Security ->

6 Social Security Changes Coming in 2026 That Impact Everyone ->

These 8 States Will Charge You Taxes on Your Social Security in 2026 ->

Here’s the Average Social Security Benefit of 84-Year-Old Americans (How Do You Compare?) ->

How Much Your Social Security Check Grows for Every Year You Wait to Claim ->

This Is the Average Social Security Benefit for Someone Age 80 ->

Kevin O’Leary’s $500K Retirement Rule Has a Catch Most People Miss ->

Pentagon Data Leak Exposed Millions of Social Security Numbers (Are You at Risk?) ->

Senators Push for Big Change to Social Security to Save the Program ->

This One Retirement Move Could Help You Hold on to More of Your Social Security Check ->

Read More Advertiser and Editorial Disclosures Advertiser Disclosure FinanceBuzz is an independent, advertising-supported website. Some or all of the offers that appear on this page are from third party advertisers from which FinanceBuzz receives compensation. For example, we may receive compensation when you click on a link, when an application is approved, or when an account is opened. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear).

FinanceBuzz does not include all financial or credit offers that might be available to consumers nor do we include all companies or all available products. Information, including rates and fees, is accurate as of the publishing date and has not been provided or endorsed by the advertiser.

The credit card offers that appear on this site are from companies from which FinanceBuzz receives compensation such as banks or CardRatings.com.

The FinanceBuzz editorial team strives to provide accurate, in-depth information and reviews to help you, our reader, make financial decisions with confidence. Here’s what you can expect from us:

FinanceBuzz makes money when you click the links on our site to some of the products and offers that we mention. These partnerships do not influence our opinions or recommendations.

FinanceBuzz reviews and rates products on a variety of quantitative and qualitative criteria. Whenever possible we test each product and include our honest, firsthand experience using it. Read more about how we rate products.

Partners are not able to review or request changes to our content except for compliance reasons. Financial products are highly regulated so we work closely with partners to make sure the information we have on our site is accurate and includes any required legal language and disclaimers.

We aim to make sure everything on our site is up-to-date and accurate as of the publishing date, but we cannot guarantee we haven’t missed something. It’s your responsibility to double-check all information before making any financial decision. If you spot something that looks wrong, please let us know.

Please check your email to confirm your subscription.

Stop browsing endlessly. Get proven ways to earn pocket money, help cover rent, and crush your debt — sent to your inbox daily.

Look for the Extra email in your inbox. Make sure to open the email today so you don’t miss any future messages from us!