The president pledged to protect Social Security, and millions of seniors treated that promise as a deciding factor at the ballot box. His signature tax law has widened the funding gap, now threatening the benefits those same voters were counting on.
Karen Glenn, the Social Security Administration’s (SSA) chief actuary, detailed the cost in an Aug. 5, 2025, letter to Senator Ron Wyden (D-Ore.). The One Big Beautiful Bill Act (OBBBA) will add $168.6 billion in net costs to the program’s trust funds through 2034.
The 2026 Social Security Trustees Report projects that the Old-Age and Survivors Insurance (OASI) trust fund will exhaust its reserves by late 2032.
That timeline moved up by one quarter from the prior year’s estimate, exposing more than 60 million retirees, survivors, and dependents to automatic benefit reductions, according to the Committee for a Responsible Federal Budget (CRFB).
Also read: Social Security hides a double tax break inside one loss
OBBBA drains $168.6 billion from Social Security’s reserves
The damage flows from a mechanism Glenn detailed in her letter, which links income taxes on benefits to the program’s trust fund revenue. Any reduction in beneficiaries’ total tax liability directly shrinks the revenue stream that covers Social Security’s monthly benefit payments.
The OBBBA’s provisions reduce overall tax liability for beneficiaries, thereby reducing projected trust fund revenue in every year starting in 2025.
On its own, the legislation would shift the OASI fund’s depletion date forward by one quarter from the 2025 Trustees baseline, from the first quarter of 2033 to the fourth quarter of 2032.
The 2026 Trustees Report subsequently landed on the same late-2032 date after also incorporating lower fertility and immigration assumptions.
Glenn’s letter estimated the law would worsen the program’s 75-year actuarial balance by 0.16% of taxable payroll. The 2026 Trustees Report has since placed the deficit at 4.42% of taxable payroll, reflecting both the OBBBA’s impact and lower demographic assumptions.
Peter G. Peterson Foundation CEO Michael Peterson warned that millions of Americans face an abrupt reduction in retirement income.
<strong>If lawmakers fail to act, all Social Security recipients will face automatic, immediate benefit cuts of 22% in 2032, just six years from now…</strong>
Peterson cited the foundation’s polling, which found that 96% of voters want candidates to present a concrete plan for averting scheduled benefit cuts.
Why OBBBA cuts Social Security revenue, despite shielding seniors from taxes
The OBBBA permanently extended the lower personal income tax rates and adjusted brackets from the 2017 Tax Cuts and Jobs Act (TCJA). Those rates were scheduled to revert to higher pre-TCJA levels in 2026, but the new law locked them in place, Glenn’s letter noted.
The most significant retiree provision is a senior deduction that increases the standard deduction by $6,000 for adults aged 65 and older. Most (88% of) seniors receiving benefits will owe no federal income tax on their Social Security benefits during the deduction’s four-year window, the White House Council of Economic Advisers estimated.
The law allows eligible workers to deduct up to $25,000 in tips and $12,500 in overtime pay from taxable income, the IRS showed.
More Social Security:
- Social Security’s next COLA could erode on arrival
- Social Security’s estimator makes one costly assumption
- Social Security’s biggest check locks out most retirees
Each of those tax provisions sends less revenue to the trust funds, and two broader demographic forces compound the shortfall.
The 2026 Trustees Report lowered its assumed fertility rate from 1.90 to 1.75 children per woman and reduced its net immigration estimates.
Both demographic shifts reduce the projected number of workers paying into the system, compounding the revenue loss from the tax legislation.
Average Social Security benefits face a potential $458 monthly reduction
The average monthly retirement benefit for Social Security recipients was about $2,083 as of May 2026, SSA Monthly Statistical Snapshot data showed.
At the Trustees’ projected 78% payability rate, that figure would drop to roughly $1,625 per month, a $458 monthly loss.
Under CRFB’s 24% cut model, slightly steeper than the Trustees’ 22% projection, an across-the-board reduction would strip $345 billion in annual benefits from retirees and dependents. That cut would affect more than 60 million retired workers, survivors, and dependents receiving payments nationwide.
The Congressional Budget Office (CBO) confirmed the 2032 depletion date in its February 2026 budget update, reinforcing that multiple forecasting models align on this date.
Most older Americans, 61%, say the average Social Security monthly payment of around $2,000 is not enough to cover rising costs, AARP’s 2026 Financial Security Trends Survey found.
Social Security’s combined trust fund reserves fell $160 billion during 2025 alone, ending the year at $2.561 trillion, the Trustees Report disclosed.
Nancy LeaMond, executive vice president at AARP, told the Senate Finance Committee on Aug. 5, 2026, that lawmakers can still prevent automatic reductions by strengthening Social Security’s finances.
LeaMond testified that AARP opposes benefit cuts, including reductions to the cost-of-living adjustment, privatization proposals, and a higher retirement age.
What the shrinking timeline means for household retirement budgets
CBO’s illustrative scenario estimates reductions starting at 7% in 2032 and averaging 28% annually from 2033 through 2036.
CRFB’s state-level analysis found that retirees in 29 states would lose more than $500 a month, an amount exceeding what the average retired household spends on groceries.
Those cuts would hit a population already short on reserves; 42% of Americans not yet retired hold less than $50,000 in total retirement savings, the AARP Survey found.
Peterson called the timeline “both highly predictable and fully avoidable,” but for households building retirement budgets around full scheduled benefits, the actuarial projections from both the Trustees and CBO no longer support that assumption.
Related: Why Fixing Social Security With Tax Hikes Could Backfire — New Wharton Study
