What happens if Congress doesn’t act?

The clock is ticking to fix Social Security so it can continue to pay full benefits to the millions of Americans who rely on monthly payments from the Social Security program.

By 2032, the trust fund that Social Security relies on to pay benefits to retirees, their spouses, children and survivors of deceased workers will be depleted, according to the Social Security Administration.

Based on current projections, if Congress doesn’t act sooner to address the program’s shortfalls, benefits for all beneficiaries could be cut by 24% when that day arrives.

Because Social Security is pay-as-you-go, with funding continually coming in from payroll taxes, benefits will continue to be paid even as the calendar hits that day, even if Congress takes no action to address the program’s solvency.

Experts generally say benefits could be cut across the board at that point.

With six years left, the possibility that Congress won’t be able to meet the situation in time is “an unfortunate but present contingency,” Mark Warshawski, a senior fellow at the conservative-leaning think tank American Enterprise Institute, said in a recent study.

Wachowski said that based on their reaction to the recent federal government shutdown, lawmakers may wait until the last minute or until after the trust fund is scheduled to run out.

But Warshawsky, who previously served as deputy assistant secretary for retirement and disability policy at the Social Security Administration, said an “alternative emergency policy” could mean that not everyone would suffer a benefit cut at that point.

Congress may be able to buy time if there are no changes to curb Social Security’s underfunding come 2032, Warshawski said.

One option is to combine retirement benefits with a disability trust fund, pushing the depletion date to 2034. According to Warshawsky’s research, 81% of scheduled benefits will have been paid at that point.

Instead of cutting across the board for all beneficiaries, Warshawski said, policymakers could choose to choose who absorbs the temporary cuts. His “alternative contingency policy” was inspired by Australia’s approach to part of the superannuation program’s asset averages test.

According to Warshawski’s proposal, the cuts would focus on people ages 62 to 74 receiving retirement or widower benefits, with the idea that younger retirees can more easily adapt or reenter the workforce to replace lost income. Disability recipients are exempt.

Additionally, benefit changes will focus on specific net worth criteria. Those with a net worth of less than $470,400 in 2025 will be excluded from the cuts. Under Mr. Warshawski’s plan, some benefit reductions would apply to individuals with a median benefit value of less than $785,400 in net worth.

Warshawski told CNBC that beneficiaries with large net worths may be able to tolerate cuts, at least temporarily, under his proposed contingency policy. Meanwhile, much older people will be spared from benefit cuts.

“For the time being, this appears to be a fair way to allocate lost revenue,” he said.

Implementation of the proposed plan relies on accurate government data, Warshawski said, which could require information sharing between the Social Security Administration and the IRS.

Warshawsky’s proposal is based on a 2024 study by Andrew Biggs, a senior fellow at the American Enterprise Institute, and Kristin Shapiro, a partner at the law firm BakerHostetler. They also wrote that across-the-board benefit cuts are inevitable if Social Security exceeds its projected bankruptcy date.

Under Mr. Biggs and Mr. Shapiro’s plan, the maximum monthly benefit would be $2,050, based on $2,024. About half of the beneficiaries will continue to receive monthly payments as scheduled. The other half will be made up of high-income earners, whose benefits will be gradually reduced.

According to Biggs and Shapiro’s analysis, these changes mean that 80% of beneficiaries will see smaller benefit cuts than they would have if the cuts had been implemented across the board. Moreover, their research shows that poverty rates among older people will not increase.

“Whatever solution they come up with for the 2032 problem could require a lot of borrowing,” Biggs said in an interview with CNBC.

However, he said the market could react negatively if lawmakers decide to borrow money that cannot be repaid.

Potential recipients of Social Security retirement benefits may already be taking into account Social Security’s uncertain future when deciding when to claim, the study found.

Eligibility for Social Security retirement benefits begins at age 62. If recipients receive benefits early, their benefits will be permanently reduced.

By waiting until full retirement age (age 66 or 67, depending on year of birth) or later, age 70, beneficiaries may be able to lock in higher monthly payments.

Nevertheless, a 2025 Schroders study found that 44% of non-retirees plan to apply by age 67.

The most common reason respondents wanted to file a claim before age 70 was to access the money as soon as possible (37%), followed closely by fear of running out of Social Security money or having payments stopped altogether at 36%.

The decision about when to claim Social Security shouldn’t be an emotional decision, financial advisors say. Various factors need to be considered, including health, marital status, income, investments, and taxes.

“If you’re not in the best of health and your family isn’t going to live long, it probably makes sense to retire at 62,” says Crystal Cox, a certified financial planner and senior vice president at Wealthspire Advisors in Madison, Wisconsin.

Cox said there may be other reasons why it makes sense to claim early. “I don’t think depletion is one of them,” she said.

Upon reaching retirement age, retirees receive 100% of the benefits due. Each time you delay retirement until age 70, your benefits increase by 8%.

Based on the full retirement age of 66, beneficiaries would receive 132% of their monthly benefit if they waited until age 70, according to the Social Security Administration.

But research shows that only about 10% of beneficiaries wait until their maximum claiming age.