Social Security Is Being Squeezed From Two Directions Right Now — Here’s What to Do Before 2032

“Every financial advisor says ‘plan for full benefits.’ I’ve spent 30 years watching people plan around promises that Washington quietly breaks.”

Two things happened in the same week that should have every person within 10 years of retirement recalculating their numbers. The Committee for a Responsible Federal Budget proposed capping Social Security COLAs for higher-income retirees, and the Motley Fool laid out a sobering analysis: Congress has about 6 years to fix Social Security before automatic benefit cuts kick in.

Neither story alone would keep me up at night. Together, they tell you something the headlines aren’t saying: Social Security is being squeezed from two directions at once, and the people who’ll feel it most are the ones already carrying debt into retirement.

What You Need to Know

There are two separate forces converging here. Understanding both matters, because the people giving you advice about Social Security are usually only talking about one.

Force #1: The COLA Cap Proposal

The Committee for a Responsible Federal Budget — a bipartisan nonprofit, not a fringe group — is proposing to limit annual cost-of-living adjustments for retirees who receive the highest benefits. Here’s how it would work:

• Retirees receiving less than $45,000/year in Social Security would keep their full COLA — no change
• The top 25% of earners would face a fixed dollar cap on their annual adjustment instead of the full percentage increase
• The top 5% would see benefits roughly 7% lower by 2055
• Estimated savings: $115 billion over 10 years — about 10% of the 75-year funding shortfall

Force #2: The Trust Fund Clock

The Congressional Budget Office now projects the Old-Age and Survivors Insurance (OASI) trust fund will be depleted by 2032 — moved up a year from the previous estimate of 2033. Once that happens, Social Security can only pay out what it collects from payroll taxes in real time. It cannot borrow.

The CBO estimates that once the fund is exhausted, benefits would be cut 7% in 2032, then an average of 28% per year from 2033 to 2036. These aren’t hypothetical political threats — they’re arithmetic. If the money isn’t there, the money isn’t there.

Why You Need to Know This — From Someone Who’s Watched This Before

I’ve been helping people with money for over 30 years, and I’ll tell you what scares me about this moment: most people are only paying attention to one side of the squeeze.

If you’re only reading about the COLA cap, you’re thinking “that only affects high earners.” Maybe. But what’s a “high earner” today becomes a wider net tomorrow. That’s how every income-based policy works — the thresholds don’t keep up.

If you’re only reading about the trust fund, you’re thinking “Congress will fix it.” They might. But “fixing it” means some combination of benefit cuts, tax increases, and age changes. The fix itself will cost you something — the only question is what.

Here’s what nobody is saying clearly: even a “small” COLA reduction compounds devastatingly over a long retirement.

And if you’re carrying debt into retirement — credit cards, a mortgage, a car payment — reduced Social Security plus persistent inflation is the exact combination that drives seniors into bankruptcy. I’ve watched this pattern accelerate during every economic squeeze for three decades. The people who get hurt worst are the ones who assumed their income would keep up with their fixed costs.

Listen: Steve and Damon discuss this topic in detail on the latest podcast episode — AI Layoffs, Student Loans, and Social Security.

Things to Consider

Before you panic or tune out — both are natural reactions — consider where you actually stand. Not everyone needs to do the same thing here.

One thing that’s worth saying directly: “do nothing and monitor” is a legitimate strategy here if you’re already debt-free and living within your means. Not every headline requires action. But if you’re carrying debt into retirement, this headline requires honest math.

What to Think About Doing Right Now

1. Log into ssa.gov and pull your current benefit estimate. Know the actual number, not the one in your head from three years ago. If you’re already receiving benefits, look at your annual COLA history to understand how much your income has actually grown versus how much your costs have grown.
2. Recalculate your retirement budget assuming benefits are 20% lower than projected. This isn’t pessimism — it’s what the CBO says will happen automatically if Congress doesn’t act. If that number doesn’t work, you have time to adjust. If it does work, you can stop worrying.
3. If you’re carrying high-interest debt, pay it off before retirement. This is the single most protective move you can make against a COLA squeeze. A credit card payment that vanishes is better than a COLA increase that doesn’t come. The claiming timing matters, but the debt-free math matters more.
4. Don’t blindly follow the “wait until 70” advice. Every financial advisor says delay for a bigger check — but I took mine at 62 and ran the real numbers. When you claim early and invest the difference at even 4%, breakeven doesn’t come until your mid-80s. SSA actuarial data shows one in three men who reach 62 die before 79. A dollar at 63 — when you can travel, be active, and get on the floor with your grandkids — is worth more than a dollar at 83. The SSA itself doesn’t recommend a specific claiming age because benefits are designed to be actuarially fair. Run your own numbers with your own health, savings, and plans. Just don’t trust AI chatbots to run this calculation for you.
5. Talk to your family about this. If you have aging parents relying on Social Security, ask whether their fixed costs are covered if benefits don’t keep up. This isn’t a comfortable conversation, but it’s a necessary one — and it’s better to have it now than after the cuts happen.

Two more things from this week: Apple owes you up to $95 per iPhone from a new settlement (file the claim and put it toward debt), and the 25% EU tariff is quietly inflating your grocery and clothing bills by $100-250/month.

FAQ

Will Social Security COLA increases be eliminated?

No. The current proposal from the Committee for a Responsible Federal Budget would cap COLAs for higher-income retirees — not eliminate them. Retirees receiving less than $45,000/year would keep their full COLA. This is a proposal, not law.

When will Social Security run out of money?

The CBO projects the OASI trust fund will be depleted by 2032. This doesn’t mean Social Security disappears — it means the program can only pay out what it collects from payroll taxes, resulting in an estimated 23% across-the-board benefit cut unless Congress acts.

How much will Social Security benefits be cut if Congress does nothing?

The CBO estimates a 7% cut in 2032 when the trust fund is first depleted, followed by an average 28% cut per year from 2033 to 2036. These cuts would apply automatically to all beneficiaries regardless of income.

Is my Social Security protected if I file bankruptcy?

Yes. Social Security benefits are fully exempt from creditors in bankruptcy. Creditors cannot garnish your Social Security income, and filing bankruptcy does not affect your benefit amount. Federal Reserve research shows bankruptcy filers recover faster than those who don’t file.

Should I claim Social Security early because of the trust fund problem?

This is actually a more nuanced question than most advisors admit. The trust fund risk is real, but the conventional “always delay” advice has its own problems. I took mine at 62 — not out of fear, but because the math made sense for my situation. Claiming early gives you 5-8 years of checks that, when invested at even modest returns, create a head start that takes until your mid-80s to overcome. SSA data shows one in three men who reach 62 won’t make 79. The trust fund situation actually strengthens the case for claiming earlier: if benefits are cut proportionally, you’ve already collected years of full payments. Run the numbers for YOUR situation — health, savings, spouse, plans — not a generic calculator.

This is what I’m seeing after watching Social Security debates for three decades. The political promises change, but the math doesn’t. Whether benefits get capped, cut, or somehow fully funded, the safest position is always the same: lower your fixed costs, eliminate your debt, and don’t build a retirement plan that depends on Washington keeping every promise. That’s not cynicism — that’s 30 years of watching what actually happens. Take this as input for your planning, not a directive. You know your situation better than anyone. Nobody gets to tell you what to do with your money — not me, not anyone.

Steve Rhode The Get Out of Debt Guy | Consumer Debt Expert

Consumer debt expert & investigative writer. Personal bankruptcy survivor (1990). Washington Post award-winning author. Exposing debt scams since 1994.

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