A new long-range forecast from the Penn Wharton Budget Model (shared exclusively with CNBC) projects Social Security’s OASI trust fund could be depleted in February 2033, later than the Social Security trustees’ June 9 estimate of a depletion through the fourt
On the surface, it looks like a reprieve. In the latest long-range forecast from the Penn Wharton Budget Model, Social Security’s retirement trust fund isn’t expected to run out as soon as the official projection suggested.
The trust fund Social Security relies on to help pay retirement benefits — Old-Age and Survivors Insurance. or OASI — may be depleted in February 2033. according to the Penn Wharton Budget Model at the University of Pennsylvania. shared exclusively with CNBC. The comparison point is the Social Security trustees report released on June 9. which projects that the OASI fund may last through the fourth quarter of 2032.
Put together, the picture shifts again. If the OASI and disability insurance trust funds are combined. the Penn Wharton Budget Model projects that the depletion date may be pushed to February 2035. The Social Security trustees report forecasts a third-quarter 2034 depletion date for the combined funds.
Social Security doesn’t use trust funds as a backup in the dramatic sense — it uses them as a bridge. The program relies on incoming revenue from payroll taxes to pay benefits. When benefit payments exceed payroll tax income, the program taps the trust funds to cover the difference. The forecasts both assume lawmakers take no action to shore up the program.
Even if the trust funds run out. Social Security would not go bankrupt. as payroll taxes that fund benefits would still keep coming in. The change would be about what people receive. When the combined trust funds are depleted. the Penn Wharton Budget Model anticipates that 86% of scheduled benefits will be payable. falling to 60% by 2100. Social Security’s trustees project 83% would be payable once the combined funds are depleted, dropping to 65% in 2100.
That gap matters not just for spreadsheets, but for the political clock. Wharton’s forecast may have moved the dates later, yet it still lands on a message that has become harder to ignore: the system still needs changes.
Kent Smetters. a Wharton professor and faculty director of PWBM. said the new outlook still points to the need for “a pretty sizable increase” in either taxes or benefit cuts going forward. “We’re still talking about a pretty sizable increase that would be necessary in terms of taxes or benefit cuts going forward. and if we don’t take action soon. that number just simply goes up. ” Smetters said.
PWBM’s independent analysis of the program’s solvency had previously projected earlier depletion dates than Social Security’s trustees. This time. the report says the gap “has closed and slightly reversed.” The result is less about comfort than timing — and timing is what determines whether policymakers move while options are still broader.
The financing shortfall is quantified in a way that turns debate into arithmetic. While a positive actuarial balance represents a surplus in financing. it is called an actuarial deficit when negative. according to the Social Security trustees report. PWBM projects an actuarial deficit of 4.65% of taxable payroll, versus 4.42% projected in this year’s Social Security trustees report.
Closing that shortfall would require raising the current 12.4% payroll tax rate for both employees and employers to 17.1% — a 4.7 percentage point increase, according to the report. Policymakers may also opt for an equivalent reduction in benefits or some combination of both, the report states.
What’s driving the different depletion dates isn’t a political dispute. It’s the machinery under the forecast.
Social Security’s trustees project using what starts as broad assumptions about the country. such as fertility and average wage growth. then applies those inputs to generate long-range projections. PWBM uses a microsimulation model that starts with individual-level data. including earnings and family structures. and treats categories like fertility. life expectancy. and wage growth as outputs rather than assumptions.
The trustees report this year included four major changes. Karen Glenn. the agency’s chief actuary. said during a June 10 virtual briefing hosted by the Committee for a Responsible Federal Budget. a nonpartisan organization focused on educating the public on fiscal policy issues. Those changes were: the assumed total fertility rate being lowered to 1.75 children per woman. down from 1.90 children per woman; immigration projections being updated to reflect recent historical data and future expectations; labor productivity. also known as real GDP per hour worked. and average real earnings being projected to grow faster in the near term; and President Donald Trump’s “big beautiful bill” making changes to income tax rates and standard deductions. resulting in less revenue to Social Security’s trust funds through income taxes on benefits.
PWBM’s expectations differ in two of those areas. The report forecasts a lower long-term fertility rate of about 1.6 births per woman. It also doesn’t break out the effects of the “big beautiful” law specifically. Smetters said the law does not directly eliminate taxes on Social Security benefits. which would have had a bigger financial impact. While there is revenue lost due to the law. he said there are also short-run economic gains. and the resulting changes are “well within the standard error of forecasting.”.
Other factors could still move the numbers. Smetters said that if GLP-1 drugs are proven to extend life expectancies. that would negatively impact the program’s long-run shortfall as people live longer. He also said that while PWBM research shows artificial intelligence will increase productivity and GDP over the long term. there are risks to the economy. particularly if an AI bubble bursts. which could create negative macro effects.
The forecast debate also contains a small but telling correction: this story has been revised to reflect that raising the payroll tax rate from 12.4% to 17.1% represents a 4.7 percentage point increase. A previous version misstated the magnitude of the increase.
Social Security OASI trust fund depletion Penn Wharton Budget Model Kent Smetters payroll tax disability insurance trust fund actuarial deficit