Could your retirement budget handle a smaller Social Security payment?
New projections have brought that question into sharper focus. The Congressional Budget Office’s September 2026 outlook projects that the Old-Age and Survivors Insurance (OASI) trust fund—the fund supporting retirement and survivor benefits—will exhaust its reserves in fiscal year 2032. According to the Committee for a Responsible Federal Budget’s analysis, incoming funding would fall short of scheduled retirement benefits by 26% at depletion unless lawmakers address the gap.
That is a conditional projection, not an announced reduction to today’s checks. For households approaching retirement, the useful question is how a potential income reduction could affect everyday expenses, especially a mortgage, rent, and other housing costs.
What the 26% figure actually means
The projection does not announce an immediate cut to Social Security checks. It describes a future funding gap if the retirement trust fund reaches reserve depletion without a legislative solution.
Social Security would continue receiving income, including payroll taxes, after its reserves were exhausted. The problem is that incoming money would not be sufficient to cover all scheduled benefits under the projected scenario. The Social Security Trustees’ 2026 report makes the same distinction between trust fund reserves and continuing income.
Reserve depletion would leave a substantial financing shortfall, but it would not eliminate the program’s ongoing revenue. Nor does the projection determine what any particular person will receive: Congress could change the law before the projected depletion date.
Why some reports say 22% instead
The Social Security Trustees’ 2026 report projects that the OASI trust fund will exhaust its reserves in the fourth quarter of 2032. At that point, continuing income would cover 78% of scheduled benefits, implying a 22% shortfall. The Social Security Administration’s announcement summarizes that estimate.
CRFB’s comparison puts the shortfall under CBO’s projections at 26%. Both projections point to 2032 for retirement trust fund depletion, but they differ in their estimates of the funding gap. Neither percentage is a precise prediction of any individual’s future payment. Policy choices and economic conditions can change the outcome.
What a 26% reduction would look like in dollars
A percentage becomes easier to understand when applied to a monthly budget. The examples below simply multiply a hypothetical scheduled monthly benefit by 74%. They illustrate a uniform reduction for planning purposes; they do not predict how any future policy would affect individual recipients.
| Hypothetical scheduled monthly benefit | After a hypothetical 26% reduction | Monthly difference | Annual difference |
|---|---|---|---|
| $1,500 | $1,110 | $390 | $4,680 |
| $2,000 | $1,480 | $520 | $6,240 |
| $2,500 | $1,850 | $650 | $7,800 |
| $3,000 | $2,220 | $780 | $9,360 |
These figures exclude taxes, Medicare deductions, and future cost-of-living adjustments. For someone expecting $2,000 a month, the illustrated gap is $520 each month. A useful budgeting exercise is to identify which expenses that $520 currently covers—and what alternatives would be available if income fell.
Why housing costs deserve special attention
Consider a hypothetical household expecting $4,000 in monthly retirement income: $2,000 from Social Security and $2,000 from other sources.
If its Social Security income fell by 26%, total monthly income would decline to $3,480. With housing expenses of $1,500 a month, housing would consume about 43% of income, compared with 37.5% before the reduction.
The housing bill has not increased. It simply takes a larger share of the household’s remaining income. That is why a retirement budget should include the full cost of housing: mortgage payments or rent, property taxes, homeowners insurance, association fees, utilities, and maintenance. Paying off a mortgage would remove one expense, but the others would remain. If you have a mortgage, our Mortgage Calculator can help estimate principal, interest, taxes, and insurance; add your other housing costs separately.
A practical way to test your retirement budget
Build two versions of your budget: one using your expected Social Security benefit and another using 74% of that amount as a stress-test scenario, not a forecast. Keep the assumptions consistent, including whether amounts are expressed in today’s dollars or future dollars. Then compare essential expenses with income in each version.
The exercise can help answer three questions:
- Would essential expenses still be covered?
- How much monthly flexibility would remain?
- Which spending commitments would be hardest to adjust?
A shortfall in the second scenario is a reason to examine your options carefully. The calculation alone does not establish that you should retire later, sell your home, or change when you claim benefits.
For your next budget review, start with one concrete number: your total monthly housing cost. Compare it against both income scenarios and see how much room remains for everything else.
Sources: CBO’s 2026 Long-Term Projections for Social Security (September 17, 2026); CRFB’s analysis of CBO’s projections (September 21, 2026); and the Social Security Administration’s 2026 Trustees Report summary (June 9, 2026). Examples are illustrative, not individualized financial advice.