According to a new research from the Committee for a Responsible Federal Budget, a dual-earning couple retiring in early 2033 should expect an average $18,100 lower annual Social Security income than if they retired today.
The 24% reduction is predicted to occur shortly after Social Security’s Old-Age and Survivors Insurance (OASI) Trust Fund is depleted. OASI collects payroll taxes to help fund Social Security. That fund is predicted to be drained by late 2032, when the number of retirees exceeds the number of working.
Once OASIs are depleted, Social Security benefits will no longer be provided at their full rate. Instead, benefits will be reduced, with payments limited to the amount of money received.
Even worse, “the cuts would grow over time as scheduled benefits continue to outpace dedicated revenues,” the nonpartisan CRFB stated in its report. According to the report, by 2099, the required benefit cut will have increased to well over 30%.
Here’s how cuts may effect Americans
A two-income household receives an average annual cut of $18,100. The actual extent of the benefit decrease varies according to a couple’s age, marital status, and employment history.
CRFB provided the following examples of how Americans could be affected in nominal or non-inflation adjusted terms:
- A typical single-earner couple would face a $13,600 decrease, and a low-income couple with two earners would face a $11,000 cut per year.
- High-income couples could face a decrease of around $24,000.
- Although the cut would be smaller in absolute terms for a typical low-income couple than for a high-income couple, it would account for a greater proportion of their income and previous earnings.
How many Americans might be affected?
The Social Security Administration reported that roughly 67 million Americans received Social Security benefits in June.
According to an AARP study of 3,599 persons aged 18 and over conducted last month, 96% of Americans believe Social Security will be significant in 2025, with little variation by age group or political party membership. The AARP is a nonprofit organization that advocates for elderly Americans.
According to the AARP, nearly two out of every three elderly Americans rely heavily on Social Security, with another 21% relying on it somewhat.
CRFB vs Social Security and Medicare Trustees
The CRFB’s forecast of a 24% decrease in seven years is more dismal than the Social Security and Medicare Trustees’ June report, which predicted a 23% drop in eight years. This is because CRFB takes into consideration the impact of the One Big Beautiful Bill Act (OBBA), which was signed into law on July Fourth, according to the think tank.
“The tax rate cuts and increase in the senior standard deduction from the recently enacted OBBBA would reduce Social Security’s revenue from the income taxation of benefits, increasing the required cut by about a percentage point upon insolvency,” according to CRFB. “If the expanded senior standard deduction and other temporary measures of OBBBA are made permanent, the benefit cut would grow larger.”
The OBBBA’s $6,000 additional senior deduction is scheduled for 2025 to 2028.
What can the government do to keep the 100% benefits flowing?
According to AARP, Congress will need to increase money into the program by perhaps hiking payroll taxes, cutting overall spending on benefits by raising the full retirement age, or a combination of the two.
Congress may also save money by lowering the maximum taxable income for payroll tax and reducing benefits provided on higher salaries, according to the CRFB.
