Social Security benefits could be cut 22% in 2032—and one fix would mean a 40% payroll tax hike for millennials and Gen Z

Millions of Americans are getting a raise from Social Security next year.

But the bigger story may be what happens a few years later, when the program’s main trust fund is projected to run dry.

The Social Security Administration (SSA) announced a 3.6% cost-of-living adjustment (COLA) for 2027 on Oct.

14, raising monthly payments as the program faces a long-term funding shortfall that could trigger automatic benefit cuts in the early 2030s.

The adjustment, which takes effect in January 2027 for nearly 72 million Social Security beneficiaries, will raise the average retirement benefit by about $75 a month, to an estimated $2,170 from $2,095, according to the SSA’s 2027 COLA fact sheet .

Higher payments for about 7.3 million people receiving Supplemental Security Income (SSI) will begin on Dec.

31, 2026.

Some people receive both types of benefits; in all, the agency says the increase will reach 76 million Americans.

COLAs are designed to help Social Security and SSI payments keep pace with inflation.

The adjustment is based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), as measured by the Bureau of Labor Statistics.

Still, some retirees and advocates say this year’s bump isn’t enough to cover rising costs.

When Social Security’s trust funds are projected to run out The increase comes as the program faces mounting financial pressure.

According to the 2026 Social Security trustees report , the Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, is projected to run out of reserves in the fourth quarter of 2032.

At that point, incoming revenue would cover an estimated 78% of scheduled benefits—effectively a 22% cut—with that share projected to decline to 62% by 2100 if lawmakers don’t change the program’s financing.