New long-term estimates suggest the Social Security trust funds may last slightly longer than previously expected. The Old Age and Survivors Insurance (OASI) trust fund, which primarily pays out retirement benefits, could be exhausted by February 2033, according to new projections analyzed by CNBC Reports from the University of Pennsylvania’s Penn Wharton Budget Model (PWBM).
Key estimate differences
This is slightly later than the official release time social security trustee According to a Social Security Trustees report released on June 9, it is predicted that the fund may continue until the fourth quarter of 2032. If OASI merges with the Disability Insurance Trust Fund, depletion could be pushed further to February 2035, according to PWBM estimates.
Social Security trustees expect a slightly earlier consolidated exhaustion date in the third quarter of 2034. Social Security is primarily funded by payroll taxes, which come from workers and employers, and the money is used to pay benefits. When payroll tax revenue is insufficient to pay benefits, the system uses money from the trust fund to fill the gap.
Benefits after funding ends
If the trust fund runs out, Social Security won’t stop completely because payroll taxes will still come in. However, if no changes are made after exhaustion, benefits will be automatically cut. PWBM estimates that approximately 86% of scheduled benefits will still be paid initially after exhaustion. According to CNBC, this number will drop to around 60% by 2100.
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Social Security trustees estimate the outcome slightly differently, saying about 83% of benefits will be paid out after they are exhausted. The trustees also expect this proportion to fall to around 65% by 2100. PWBM earlier expected Social Security funds to be depleted faster than trustees, but now says the difference between the two forecasts has narrowed and reversed slightly.
Funding gaps and rising taxes
According to CNBC, one leading expert, Kent Smythes (PWBM’s dean of faculty), said “considerable” reforms are still needed, such as raising taxes or cutting benefits. PWBM estimate The long-term financial shortfall (actuarial deficit) is 4.65% of taxable wages, compared with trustee estimates of 4.42%. To close the gap, payroll taxes would need to rise from 12.4% to about 17.1%, which would represent an increase of 4.7 percentage points, according to CNBC.
Alternatively, policymakers could reduce benefits or use a combination of tax increases and benefit cuts rather than one solution alone. PWBM and trustees use different approaches: PWBM uses microsimulation models based on personal data such as income and household structure. Instead, Social Security trustees start with broad assumptions about fertility rates and wage growth, and then base their forecasts on those assumptions.
Main policy assumptions
According to a presentation to trustees by Karen Glenn, this year’s trustees’ report includes major updates such as a lower fertility rate (1.75 children per woman), updated immigration expectations and faster near-term productivity and wage growth.
Trustees also stated that the changes president donald trumpThe tax law affects Social Security revenue by reducing welfare tax revenue. The PWBM projects a slight decline in long-term fertility, to about 1.6 births per woman, and does not model the full impact of the tax law changes separately. Experts also say long-term risks such as people living longer due to better medicines or greater productivity brought about by artificial intelligence could widen the funding gap further, CNBC quoted Kent Smetters as saying.
