Here’s How Big Social Security Cuts Could Be Without Reforms

The main trust fund used to support the payment of Social Security benefits is set to run dry sometime in 2033 or 2034, according to the latest government estimates, at which time promised benefits are expected to be cut by more than 20%.

Now, a new report published by the Committee for a Responsible Federal Budget seeks to put a dollar figure on the pending cuts, finding the average dual-income couple retiring at the time of trust fund depletion would see a $16,500 cut in annual benefits.

As the report authors emphasize, former President Donald Trump and Vice President Kamala Harris have both said on the campaign trail that they would “protect” the Social Security program. However, neither has yet put forward a plan to meaningfully do so.

In fact, Trump has proposed eliminating taxes on Social Security benefits, which would significantly worsen the program’s finances, according to the nonpartisan advocacy organization.

Ultimately, policymakers must take action in the years ahead to address the program’s funding woes, or they will consign millions of Americans to a lower standard of living in retirement. The good news is that lawmakers have many potential levers to pull to help right the ship without putting too much of a burden on any given set of stakeholders.

A Fundamental Imbalance

The Social Security funding crunch is a big problem, according to the report, but its causes are straightforward. Simply put, people are living longer lives in retirement at the same time that the U.S. population is becoming increasingly top-heavy.

As a result, the Social Security program is paying out more in benefits than it collects in payroll tax and other revenue, and it is drawing down its reserves to cover the remaining cost of benefits, the authors observe.

Specifically, the program’s trustees project that the Old-Age and Survivors Insurance Trust Fund — which funds retirement benefits — will deplete its reserves in the fourth quarter of 2033. That is when today’s 58-year-olds reach the normal retirement age and today’s youngest retirees turn 71, according to the CRFB report.

“Once the reserves are depleted, the law limits benefits to incoming revenue, which essentially mandates a 21% across-the-board benefit cut for the program’s 70 million beneficiaries,” the authors warn.

As noted, this equates to a $16,500 nominal benefit cut for a typical dual-income couple who retired at the time of trust fund depletion, or a $12,400 nominal reduction for a typical single-income couple.

More Detail on the Potential Cuts

The actual size of the benefit cut would vary across retirees depending on their age, work history and lifetime incomes.

“For example, a low-income, dual-income couple retiring in 2033 — as defined by the Social Security Trustees — would see a $10,000 cut to their benefits,” the authors warn. “A high-income, dual-income couple would see a cut of $21,800.”

Also troubling is the projection that, while retirees will experience a 21% across-the-board cut to their benefits in 2033, this automatic cut will grow over time. It could reach 31% by 2098, due to the widening gap between the program’s benefits and revenues.

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