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Social Security recipients could face an across-the-board 22% reduction in benefits in 2032 without action from Congress, according to the Committee for a Responsible Federal Budget (CRFB), as a new cost-of-living adjustment reignites debate over the program’s financial future.
The warning comes as the Social Security Retirement Trust Fund nears its scheduled depletion date in 2032, putting pressure on lawmakers to close the program’s long-term funding gap.
Social Security recipients will benefit from a 3.6% cost-of-living adjustment in 2027, increasing the average monthly retiree benefit by about $75, from $2,095 to $2,170, according to estimates cited by AARP.
The increase, announced Wednesday by the Social Security Administration, will take effect with December benefits, paid in January.
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Two people enter a Social Security Administration office in suburban Detroit. (Jim West/UCG/Universal Images Group via Getty Images)
The 2027 increase is the COLA’s highest in four years and compares to a 2.8% adjustment this year. It reflects third-quarter inflation figures, including a 3.9% year-on-year increase in the consumer price index for urban wage earners and office workers in September.
The increase comes as many older Americans continue to face higher costs for groceries, utilities, insurance and health care. The standard Medicare Part B premium is also expected to increase by $6.60 per month in 2027, to $209.50, according to AARP.
The CRFB estimates that the 3.6% adjustment will add about $900 per year to the average retiree’s benefits, although the program’s projected funding shortfall raises questions about the sustainability of future payments.
A woman enters a Social Security office in Houston, Texas, July 13, 2022. (Mark Félix/The Washington Post / Getty Images)
But this increase will not be distributed equally in terms of dollars. The CRFB estimates that while the average retiree will receive about $900 more per year, those receiving the highest benefits could see increases exceeding $2,200. The group said higher-earning couples who retired this year at normal retirement age could receive a combined increase of $3,600, bringing their annual benefits above $100,000.
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The dollar’s larger gains come amid a broader generational economic divide. A Federal Reserve report released in May found that only 63% of adults ages 18 to 29 reported doing well financially or living comfortably in 2025, compared with 83% of adults ages 60 and older. Nearly half of adults under 30 received financial help from someone outside their household to cover expenses during the year.
An eagle tops the facade of the US Federal Reserve building in Washington, July 31, 2013. (Jonathan Ernst/Reuters)
The financial pressures facing young Americans add another dimension to the debate over the future of Social Security. Current workers help fund the program through payroll taxes, even though its retirement fund faces a projected deficit. According to the Social Security Trustees’ 2026 Report, the fund is expected to exhaust its reserves in 2032, leaving sufficient continuing income to cover about 78% of expected retirement and survivor benefits without changes to the law.
CRFB has advocated for changes to how COLAs are calculated, including using a different inflation measure or capping increases for higher-income beneficiaries. The group also supports additional revenue and other benefit reforms to improve the program’s finances.
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AARP, however, opposes proposals to reduce or cap annual COLAs, arguing that the adjustments are already not enough to keep pace with the costs faced by older Americans.
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