Social Security trust fund deficit fiscal 2026, Digi Mart USA News: Congress needs to get serious about tweaking Social Security, but this time to improve the financial aspects. The last major change to the Old-Age and Survivors Insurance (OASI) program was the Social Security Fairness Act, which President Biden signed on January 5, 2025, and which worsened the Social Security deficit.
The Act expanded benefits to retirees with careers in government, education, and law enforcement who were already covered under public pension plans, and included retroactive catch-up payments. It substantially expanded costs but did not expand contributions.
The Social Security Administration (SSA) has now released income and cost figures for the fiscal year ended September 30, and the picture is troubling. All figures exclude the Disability Insurance Trust Fund, which by law is separate from the OASI Trust Fund.
When total income exceeded total costs, the Social Security Trust Fund ran a surplus and its balance grew. In 2018, costs exceeded income for the first time in over four decades, and the trust fund began to decline.
That deficit has now grown substantially.
The deficit, the difference between the fund’s income and costs, was already large in prior years and worsened further after the Social Security Fairness Act. In fiscal 2025 the deficit doubled year over year to $181 billion, driven in part by retroactive payments and an expanded number of beneficiaries.
It then rose to $220 billion in fiscal 2026. Compared with fiscal 2024, the deficit has grown by 141% over those two years.
The Social Security Trust Fund balance fell by the amount of the deficit, $220 billion, or 9.2%, to $2.18 trillion at the end of September. From the mid-1980s through 2017, the trust fund ran annual surpluses totaling $2.82 trillion by 2017, before deficits began to erode it.
Since that 2017 peak, the balance has dropped by $640 billion, or 22.7%.
In April 1983, three months before the Social Security Trust Fund was projected to become insolvent, Congress passed the Social Security Amendments of 1983 by a bipartisan vote, and President Reagan signed them into law. The changes created the surpluses that raised trust fund balances for more than 40 years, peaking at $2.82 trillion in 2017.
In the House, 163 Democrats and 80 Republicans voted for the measure; 51 Democrats and 38 Republicans did not vote; and 54 Democrats and 48 Republicans voted against it. In the Senate, 26 Democrats and 32 Republicans voted for it.
The Social Security Trustees and the Congressional Budget Office (CBO) both expect that, without changes by Congress, the Social Security Trust Fund will run out of funds by mid-2032. At that point, retirees would see benefits cut by 23%, unless Congress fills the gap from the general budget.
Compared with the crisis of the early 1980s, there is still time to fix the system. However, the longer Congress waits, the larger the deficit grows and the harder it becomes to fix.
Several proposals have been floated in Congress in recent years, but they have not advanced. Each proposed several relatively small tweaks that, combined over time, would add up to a long-term fix, similar to the changes made under Reagan.
Total income rose by $43.5 billion, or 3.5% year over year, to a record $1.28 trillion. Total income consists of contributions, interest income, and taxation benefits.
Contributions rose by $49.7 billion, or 4.4%, to $1.17 trillion, driven by growth in wages and salaries. That increase was more than double the prior year’s 1.9% gain as the labor market improved in 2026.
Interest income from Trust Fund securities declined by 8.3% to $58.4 billion, largely because the interest-earning balance fell by 9.2%. Apart from fiscal 2025, interest income has declined since 2010.
Higher interest rates since 2022 have begun to flow into Trust Fund securities, but the lower balance has offset much of that gain.
The average interest rate the Trust Fund earns on its Treasury securities rose to 2.78%, the fourth consecutive year of gradual increases, as low-rate securities issued during the quantitative easing and zero-interest-rate period matured and were replaced with higher-rate securities with shorter maturities. Taxation benefits declined by $2.4 billion from the prior year’s record to $55.8 billion, the second-highest on record.
Total costs rose by $83 billion, or 5.8% year over year, and 16% from two years earlier, to a record $1.50 trillion. Benefit payments rose by $83 billion (5.9%) to $1.49 trillion, reflecting more retirees drawing benefits, including through the Social Security Fairness Act, and cost-of-living adjustments.
Administrative expenses fell by $800 million for the second straight year to $3.7 billion, or 0.17% of the Trust Fund balance. The transfer to the Railroad Retirement Program rose by $300 million to $6.3 billion.
Of the Trust Fund’s total balance, $1.98 trillion was invested in interest-bearing special-issue Treasury securities and $198 billion in short-term cash-management securities known as certificates of indebtedness. Special-issue Treasury securities are not traded in the secondary market, so their prices do not fluctuate with bond market conditions.
