Social Security Trust Funds Near Insolvency, Benefits May Cut 24% by 2033

Social Security faces significant challenges as inflation continues to erode retirees' purchasing power, with the current cost-of-living adjustments (COLAs) based on the CPI-W index often failing to fully reflect the rising costs of healthcare and housing for seniors. Experts warn that Social Security's trust funds, particularly the Old Age and Survivors Insurance (OASI) fund, are projected to run out between 2032 and 2034, potentially forcing benefit cuts of up to 19% if Congress does not enact reforms. While Social Security will continue to receive payroll tax revenue after insolvency, this funding would cover only about 77% to 83% of scheduled benefits, impacting current and future beneficiaries. Lawmakers face pressure to consider measures such as raising the income cap on taxable wages or investing trust funds in diversified assets to sustain the program. Additionally, claiming Social Security benefits early can reduce monthly checks, which may exacerbate financial struggles in retirement, especially when COLAs merely match inflation rather than outpacing it. The debate continues over whether the CPI-W is the best measure for calculating COLAs, with proposals to adopt a CPI-E index that better captures seniors' spending patterns, although no changes have been implemented yet.