How Rising National Debt Threatens Social Security, US Retirement

U.S. national debt now exceeds $39 trillion and is projected to approach 120% of GDP within the next decade, meaning the federal government would owe 20% more than the annual output of the U.S. economy, a recent report from the Conference Board warns.

The report modeled several fiscal scenarios to illustrate how rising debt and higher interest rates could affect households and businesses. Among the findings, higher borrowing costs could increase pressure on Social Security, while also making it more expensive for small businesses to grow.

The report’s scenarios began with a baseline scenario which presents annual deficits of 6% to 7% of GDP, with the national debt projected to reach 154% of GDP by 2036. In the report’s higher-deficit scenario, the annual deficit reached 9% and the national debt increased to 180% of GDP by 2036. In a deficit-reduction scenario, the deficit is reduced to roughly 3% of GDP, and national debt reached 126% of GDP by 2036.

Focus on Social Security

For retirement savers and advisers, the report’s most pressing finding is its outlook for Social Security. As the Social Security Administration has projected, the program’s primary trust fund will become insolvent in 2032. Assuming monthly benefits equal to payable amounts from the Old Age and Survivors trust fund, a future retiree collecting a monthly retirement benefit of $2,100 faces a monthly benefit cut of $170 in 2032 and more than $700 in subsequent years.

The report estimated that restoring full solvency through trust fund transfers alone would require roughly $2.7 trillion between 2032 and 2036, further increasing federal deficits unless offset by tax increases or spending reductions.

Many Americans appear to recognize that changes to Social Security are needed. According to Nationwide Retirement Institute’s 2026 Social Security Survey, 80% of 1,823 U.S adults surveyed who currently receive or expect to receive Social Security benefits believe the program requires reform, including 82% of Democrats and 78% of Republicans.

Respondents from both political parties largely agreed on potential solutions. Increasing taxes on higher earners was the most popular proposal, supported by 51% of respondents, followed by increasing employer contributions at 42% and reducing benefits for higher-income beneficiaries at 38%.

Despite broad agreement that reform is necessary, many Americans remain unprepared for potential changes. Nationwide found that only 20% have a clear plan for how they would adjust their finances if benefits were reduced, even as the average respondent expects the program’s funding challenges to be nearly two decades away.

That perception differs significantly from current projections. The 2026 Social Security Trustees Report estimates the trust fund could be depleted by the fourth quarter of 2032.

The uncertainty is already influencing retirement decisions. Nationwide found that 51% of Americans either have claimed or plan to claim Social Security as early as possible out of concern that future changes could reduce their benefits. Filing early, however, generally results in permanently lower monthly payments.

Financial professionals can play an important role in helping clients prepare for multiple outcomes, according to the survey. Respondents working with a financial adviser were nearly four times more likely to report having a plan for reduced Social Security benefits than those without professional guidance.

Further Implications

Beyond retirement implications, the Conference Board found that rising debt levels could also create challenges for small businesses. Under one adverse fiscal scenario, two business loans totaling $250,000 would generate roughly $105,000 in additional borrowing costs, a 7% increase from baseline projections. Under an extreme interest-rate-shock scenario, additional costs would exceed $1 million.

Those risks come as small businesses already face mounting cost pressures. According to The Conference Board report, small-business profitability declined 1.3% year over year through April 2026, while gasoline expenses increased 31%.

The Conference Board report ultimately called for Congress to establish a bipartisan fiscal commission tasked with stabilizing the nation’s debt burden and developing long-term reforms.

“Business leaders should recommend that the U.S. government reduce its debt-to-GDP ratio to more sustainable levels, such as 70%, along with a bipartisan fiscal commission composed of members of Congress to find the space to deliberate trade-offs and develop solutions,” said Luis Bourgeois, a researcher and writer of fiscal policy at the Conference Board, in a video published with the report.