Social Security funding gap widens in 2026 trustees report

Social Security’s long-term financial outlook deteriorated significantly in the latest annual report from the program’s trustees, with officials projecting a larger funding shortfall and an earlier depletion date for the retirement trust fund.

The 2026 Trustees Report estimates Social Security‘s 75-year funding gap at 4.42% of taxable payroll, up from 3.82% a year earlier.

That increase, laid out Tuesday in a brief published by the Center for Retirement Research at Boston College, stems largely from lower projected birth rates, reduced immigration and federal tax changes that are expected to decrease revenue flowing into the system.

The report projects that the Old-Age and Survivors Insurance trust fund will be exhausted in 2032, one year sooner than previously forecast. At that point, incoming payroll tax revenue would cover only about 78% of scheduled retirement benefits.

Despite the worsening outlook, researchers at the Center for Retirement Research at Boston College said the program’s challenges remain manageable and that “all that is needed is the political will.”

Lower fertility, immigration policy drive revenue declines

A major change in this year’s report is a substantial reduction in the trustees’ long-term fertility assumption.

The projected lifetime birth rate was lowered from 1.90 children per woman to 1.75, reflecting years of declining U.S. fertility and the absence of a post-pandemic rebound.

Fewer births today translate into fewer workers contributing payroll taxes in the future, reducing revenue available to support retirees.

The report also assumes lower levels of temporary and unauthorized immigration. Trustees reduced projected annual entries in those categories and incorporated expectations of stricter immigration policies, leading to a smaller future workforce and lower payroll tax collections.

Together, changes related to fertility and immigration account for a significant share of the increase in Social Security’s projected deficit.

Tax law adds pressure

The report also factors in the One Big Beautiful Bill Act, which permanently extends tax provisions first enacted in 2017 and expands deductions for many taxpayers.

Because fewer retirees are expected to pay income taxes on their Social Security benefits, trust fund revenue is projected to decline. Trustees estimate the legislation reduced the program’s actuarial balance by 0.16% of taxable payroll.

While trustees adopted assumptions that reduce projected revenues, they also introduced changes that improve Social Security’s financial outlook on paper.

The report assumes somewhat faster productivity growth during the next decade, which would boost wages and payroll tax revenue. It also projects higher mortality rates, meaning beneficiaries would receive payments for fewer years.

Researchers at Boston College questioned both assumptions, arguing they may be overly optimistic.

They noted that Congressional Budget Office projections are less aggressive on productivity growth and that Social Security’s life-expectancy projections are lower than those used by other federal agencies.

According to the researchers, these assumptions partially offset the financial impact of lower fertility and immigration, making the system’s challenges appear smaller than they otherwise would.

Pressure mounts for congressional action

The report reinforces a conclusion that has remained largely unchanged for decades: Lawmakers must act to preserve full benefits.

Trustees estimate that permanently closing the funding gap would require an immediate payroll tax increase of 4.42 percentage points, equivalent to 2.21 percentage points for employers and workers alike.

Alternatively, benefits could be reduced by roughly 22% immediately, with larger reductions required over time.

The Center for Retirement Research said delaying action will limit available options and increase the eventual cost of reforms.

“Despite the larger deficit, the 2026 Trustees Report confirms what has been evident for almost three decades — namely, Social Security is facing a long-term financing shortfall and needs to be fixed,” researchers said. “Even with a deficit that equals about 1.5 percent of GDP, the changes required to fix the system are well within the bounds of fluctuations in spending on other programs in the past.”

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