Social Security Is Running Out of Money. Benefits Are Rising 3.6% Next Year Anyway.

Congress has yet to address a looming funding shortfall that could leave the retirement program unable to pay 22 percent of scheduled benefits by 2032.

With Social Security barreling toward insolvency, the government is increasing benefits in January.

On Wednesday, the Social Security Administration (SSA) announced that retirees will receive a 3.6 percent increase in Social Security benefits next year. The raise, which was unveiled shortly after the Bureau of Labor Statistics reported consumer prices rose 3.7 percent year over year in September, will amount to an increase of $75 per month for the average beneficiary. It also represents a cost-of-living adjustment (COLA) that will be 0.8 percentage points higher than last year's, which was 2.8 percent, and 0.9 percentage points higher than what was projected by the Social Security Trustees, according to the Committee for a Responsible Federal Budget.

"Social Security will implement this cost-of-living adjustment for 76 million Americans, giving them greater financial stability," said SSA Commissioner Frank J. Bisignano in a press release. "Under President Donald J. Trump, Social Security is delivering better, faster, higher-quality service for the American people."

But the announcement comes as Social Security faces a looming funding cliff.

The program has been spending considerably more than it receives for years, thanks in large part to the U.S. demographic problem: Birth rates have collapsed, life expectancy has risen, and there are fewer working-age people paying taxes to fund retirees. In 2025, the program collected $1.45 trillion in revenue and spent $1.61 trillion, leaving a $160 billion shortfall. Trust fund reserves covered the gap, but they are rapidly dwindling. In June, Social Security's Trustees projected that, without legislative changes, incoming revenue would cover only 78 percent of scheduled retirement and survivor benefits by late 2032—a 22 percent shortfall. Combined retirement and disability funds are expected to run out by 2034. There are a handful of fixes, including raising the retirement age, reducing benefits, raising the cap on earnings, means-testing the program, privatizing it, or getting rid of it altogether.

While many lawmakers have acknowledged reality, Congress remains divided on how to address the issue. In August, Sen. Ron Wyden (D–Ore.) blocked a proposal from Sen. Bill Cassidy (R–La.) to establish a congressional process to consider reforms, arguing that it would slash retiree benefits and help billionaires "avoid paying their fair share."

"People are objecting to doing their job," Cassidy complained in September. "Congress needs to fix Social Security this year."

What makes Wednesday's increase even more unjustified is the fact that older Americans are already among the wealthiest age groups in the country. According to the Federal Reserve's latest Survey of Consumer Finances released last week, households headed by someone aged 75 or older had a median net worth of $504,900 in 2025, compared with just $33,000 for households headed by someone under 35. Despite their relative wealth compared to working-age people, retirees are getting a COLA increase that is greater than the average worker, whose wages have risen by 3 percent in the last year.

For the very wealthiest beneficiaries, the 2027 COLA will constitute an enormous increase. According to the Committee for a Responsible Federal Budget, the highest-earning couples who retired this year will receive a combined increase of $3,600, meaning that their combined benefits would exceed $100,000 next year. However, without congressional action, Social Security recipients could expect a 22 percent cut that, in 2032, would wipe out the previous nine years' COLAs all at once.

Despite years of warnings about Social Security's deteriorating finances, Congress has yet to enact reforms to avert the looming shortfall. For now, beneficiaries can look forward to larger checks in January, even as the program moves closer to the day when it can no longer pay the benefits it has promised.

Comments

[Bubba Jones]

Why fix it?

[MWAocdoc]

"Social Security will implement this cost-of-living adjustment for 76 million Americans, giving them greater financial stability"

This is a lie. The COLA will keep beneficiaries from having to tighten their own financial belts for a while longer but it will not create greater financial stability for anyone. If anything spending more than they take in in revenues automatically results in inflation, which is the opposite of financial stability.

"Trust fund reserves covered the gap"

This is also false, or at least misleading. There is no actual trust fund except as a bookkeeping artifact. Every actual dollar that was put into the Trust Fund was almost immediately spent by other government agencies and exists only as a ledger entry with a fictional "interest" owed by the government to itself. When the Trust Fund covers "the gap" it means that the balance in the Trust Fund was reduced by that amount. The Fund running out means that the balance listed in their ledger account will be zero after the last dollar owed to it by other parts of the government has been used to write checks to social security beneficiaries. Therefore, at that point, Congress can simply start printing more money to send out to beneficiaries from then on. The implications for inflation should be obvious to everyone. Sadly, "kick the can down the street" prevails.