The Trust Fund Pressure Nobody’s Talking About Enough
A higher COLA doesn’t just affect what lands in retirees’ bank accounts. It also deepens the financial strain on Social Security’s underlying trust funds, and those funds are already under serious pressure.
The nonpartisan Committee for a Responsible Federal Budget (CRFB) estimated that the 2027 COLA will come in at 3.8%, slightly below TSCL’s projection. The CRFB also warned that if inflation boosts the COLA to that level without a corresponding rise in wages, it could worsen Social Security’s long-term financial picture significantly. Specifically, the group estimates it “would worsen Social Security’s shortfall by roughly $300 billion over the next decade and advance the insolvency of the old age trust fund by three months.”
That matters because the nonpartisan Congressional Budget Office has already projected that Social Security’s Old Age and Survivors Insurance trust fund will become insolvent by 2032, one year sooner than last estimated. At that point, if nothing is done, benefits would be cut automatically by around 28% across the board.
That trust fund covers benefits for retirees and immediate family members of deceased workers, accounting for more than 62 million Americans, or about 90% of all Social Security beneficiaries.
A larger COLA nudges that deadline closer. It’s not a catastrophic shift on its own, but it’s one more weight on a system that’s already carrying too much.