Retirement funds face depletion and tax recovery challenges

Retirement funding outlooks face challenges in both the United States and Canada. In the U.S., the Social Security Old-Age and Survivors Insurance (OASI) Trust Fund is projected to deplete its reserves in the fourth quarter of 2032. If reserves are exhausted, income from payroll taxes would only cover an estimated 78% of scheduled benefits. The Disability Insurance (DI) Trust Fund faces a similar projected depletion in the third quarter of 2034, which would cover approximately 83% of scheduled benefits.

In Canada, the Old Age Security (OAS) recovery tax impacts retirees with higher incomes. For the 2026 income year, the recovery tax begins for individuals with net world income exceeding $95,323. The recovery amount is generally 15% of income above the threshold, capped by the OAS received. Investors are cautioned that dividend gross-ups for tax reporting can push reported income above the threshold even if cash received is lower.