Social Security could face a 22% benefit cut in 2032 - here are the changes being discussed

Social Security is facing a funding gap that could force a major change by 2032 unless Congress takes action. Payroll taxes remain the program’s primary source of funding, but Social Security now pays more in benefits than it collects through those taxes as the number of retirees grows.

The program is using its retirement trust fund to cover the difference, but the trust fund is projected to run out in 2032. At that point, benefits could be cut by about 22%.

That deadline has put several potential solutions in focus, from higher payroll taxes and changes to the income cap to reductions in future benefits and adjustments to the retirement age.

Social Security Payroll Tax Could Rise From 12.4% to 17%

One proposal would address the funding shortfall by increasing the Social Security payroll tax from its current 12.4% rate to 17%.

According to the Cato Institute, a nonpartisan think tank that advocates free markets and limited government, a 17% payroll tax could replenish the trust fund and allow Social Security to pay benefits in full for the foreseeable future, as per CBS News.

Workers and employers generally split the payroll tax equally, while self-employed workers pay the full amount. Cato estimates that the increase would add between $2,600 and $3,000 a year in taxes for a median worker earning about $62,000.

Romina Boccia, Cato’s director of budget and entitlement policy, told CBS News that many workers could struggle to absorb that additional cost.

Why Raising Payroll Taxes Alone Is Being Debated

Boccia argued that relying solely on a higher payroll tax could place a significant burden on workers. She said many of the individuals affected do not have $400 set aside for an emergency and described the additional cost as financially impossible for most workers.

The payroll tax itself has changed substantially since Social Security began in 1937, when the rate was 2%.

With the trust fund deadline approaching, other approaches are also being discussed.

Social Security Tax Cap Could Change

One alternative is to raise or eliminate the maximum amount of income subject to Social Security taxes.

The current maximum is $184,500.

Eliminating the cap would mean high-income workers would pay Social Security taxes on more of their earnings, while the tax rate on earnings below the current cap would not increase.

In July, Sens. Elizabeth Warren, a Democrat from Massachusetts, and Bernie Moreno, a Republican from Ohio, called for lifting the payroll tax cap, as per the CBS News report. They said the change would create a system in which high-income earners pay the same share of their income into Social Security as low- and middle-income workers.

Poll Shows Support for Lifting the Payroll Tax Cap

The proposal has also received support in polling. A 2025 Bipartisan Policy Center poll of more than 4,000 Americans found that 65% of Democrats and 62% of Republicans supported lifting or removing the Social Security payroll tax cap. A majority of households earning more than $200,000 a year also supported the idea, as per the poll.

Boccia, however, pointed to potential unintended consequences from raising or eliminating the cap. She said the change could push the top marginal tax rates for high-income households above 60% in several states and could encourage some high earners to retire earlier rather than pay the higher tax.

Social Security Reform Could Also Mean Lower Benefits

The debate extends beyond taxes. Many policy experts cited in the provided material believe Social Security could require a combination of additional revenue and reductions in future benefits, as per the CBS News report.

Options mentioned include a small payroll tax increase, lifting the income cap, gradually increasing the retirement age or limiting benefits for high-income households.

Boccia said she favors an approach that places more emphasis on reducing benefits. She argued that benefits are becoming more generous over time and identified that as the key driver of the shortfall.

Could Social Security Retirement Age Rise

Another proposal discussed by Boccia is tying the retirement age to longevity. The reasoning is that as Americans live longer, they could also work longer.

However, the median retirement age in the US is 62, as per data from the Transamerica Center for Retirement Studies.

The organization also found that many people retire years earlier than expected because of layoffs, health issues or other setbacks.

Maximum Social Security Benefit Tops $62,000 a Year

Higher-earning workers can qualify for larger Social Security benefits. For people who retire in 2026, the maximum monthly benefit is $5,181, or more than $62,000 annually. Workers receiving the maximum benefit are typically those who earned near or above the income cap.

Boccia said a dual high-earning household could receive $120,000 annually from Social Security and described that amount as excessive compared with public retirement benefits in most other nations.

A Flat Social Security Benefit Is Another Proposal

Boccia’s preferred approach is a flat benefit, meaning a predictable amount that workers could plan around and supplement with their own savings. She argued that the current Social Security formula is too complex for many people to understand what they can expect to receive in retirement.

The range of proposals now includes changes to payroll taxes, the income cap, benefits and the retirement age. With the trust fund projected to run out in 2032, those options form the central discussion over how Social Security could continue paying benefits in the future.