Millions of Americans will see a raise in their Social Security benefits next year. But the bigger story may be what will happen in a few years, when the project's main trust fund is expected to be depleted.

The U.S. Social Security Administration ( SSA ) announced on October 14 that the cost-of-living adjustment ( COLA ) for 2027 would be 3.6%. At a time when the program is facing a long-term funding gap and may trigger automatic benefit cuts in the early 2030s, this adjustment will increase monthly payments.

According to the COLA guidelines for 2027 from SSA, this adjustment will take effect in January 2027, benefiting nearly 72 million social security recipients. The average pension will increase by about $75 per month, rising from an estimated $2,095 to $2,170. Approximately 7.3 million people who receive supplementary security income (SSI) will begin receiving higher payments starting from December 31, 2026. Some individuals receive both types of benefits; SSA indicates that overall, this increase will benefit 76 million Americans.

The purpose of COLA is to help social security and SSI payments keep up with inflation. This adjustment is based on changes in the Consumer Price Index (CPI) for urban wage earners and civil servants, as measured by the U.S. Bureau of Labor Statistics (CPI-W). However, some retirees and advocates argue that this year's increase is not sufficient to cover the rising costs.

When will the social security trust fund be depleted?

At the time of this increase, the project is facing increasing financial pressure. According to the 2026 Social Security Trustees Report, the trust fund for old-age and survivor insurance ( OASI ) which pays retirement and survivor benefits is expected to deplete its reserves in the fourth quarter of 2032.

By then, the incoming revenue is expected to cover only 78% of the planned benefits, which means a actual reduction of 22%; if legislators do not change the financing method for this project, this proportion is expected to drop to 62% by 2100.

The combined trust fund for old age and survivor insurance, as well as disability insurance ( OASDI ), is expected to be depleted in the third quarter of 2034. By then, incoming revenues will cover 83% of the planned benefits, and this proportion is expected to drop to 65% by 2100.

The depletion of trust funds does not mean that social security will stop collecting payroll taxes or distributing benefits. On the contrary, without additional revenue or legislative changes, the program can only cover the portion of scheduled benefits that its incoming income allows. Budget watchdogs warn that the program is on a "collision course toward insolvency."

The social security specialist stated that this project will continue for another 90 years.

Social Security Commissioner Frank Bisanziano ( Frank Bisignano ) is also the CEO of the Internal Revenue Service of the United States. He stated that despite facing funding challenges, the program will continue for several decades.

Before COLA was announced, on October 12th, Bi Sannianuo said in an interview with CNBC's Squawk Box: "This is a long journey. It is already 90 years old and will continue to exist for another 90 years. The president has promised to protect and maintain it, and that is exactly what we are doing."

Bis Sanniono was once the CEO of Wall Street and is currently reforming the way the institution operates. He also stated that SSA is working hard to correct incorrect records. “When you have 30 million records that are incorrect, what you need to do is to fix that problem,” he said, adding that the institution has already cleaned up about 10% of them, according to Fox.

He refused to discuss possible changes in taxes regarding benefits or funding for the project.

The trustee's forecast highlights the challenges faced by policymakers: if Congress does not take action, once the reserves are depleted, the income from inflows into the project will not be sufficient to cover all of the benefits planned.

How to avoid cuts to social security benefits

Congress can make up for the funding gap through reforms that increase revenue, adjust benefits, or a combination of both. The trustee report did not propose any specific solutions.

One option is to increase the payroll tax. Social security is primarily funded by levying a 12.4% payroll tax on insured income, with employees and employers each contributing 6.2%, and there is an annual cap in place. According to data from SSA, this taxable maximum income amount will rise from $184,500 in 2026 to $192,300 in 2027.

An analysis by the conservative advocacy group “Advancing American Freedom” ( Advancing American Freedom ) estimates that if only wage taxes were to be increased to maintain planned benefits, the overall tax rate would need to reach 17.3% by 2034, which is about 40% higher than the current rate of 12.4%. If action is taken sooner, the cost would be lower: the group states that if the tax rate is immediately raised to 16.65%, an increase of 34%, any benefit cuts could be avoided.

The organization also estimates that social security faces a long-term funding gap of $29.3 trillion, which is approximately equivalent to $215,000 per family.

"The $29.3 trillion gap in social security (equivalent to $215,000 per family) will not disappear on its own," said Rachel Grissler, a senior researcher at Advancing American Freedom. "Legislators either need to allow for an automatic 22% cut to benefits by 2032 or implement gradual, targeted reforms now to protect low- and middle-income retirees, strengthen the economy, and demonstrate fiscal determination before the market forces sudden action."

These estimates illustrate the trade-offs faced by legislators in balancing how to repair the project's finances while ensuring that future retirees continue to receive benefits – as U.S. national debt climbs above $40 trillion, this debate has become increasingly urgent.