Retirees could face a huge cut to benefits in the next seven years if a new funding solution isn’t found for Social Security, a new report from the Committee for a Responsible Federal Budget (CRFB) has outlined.
The committee has estimated that a couple with medium dual income retiring in 2033 would lose $18,100 per year in benefits if the trust fund conundrum is not solved. For a single income couple, this would be $13,600.
Why It Matters
Social Security is relied on by tens of millions of Americans who collect monthly benefits, which help form the bedrock of income in retirement. The program is funded by a combination of payroll taxes and government reserve funds.
But according to the latest Social Security Trustees report, the program’s two trust funds—the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) funds—when combined are projected to reach insolvency by 2034. At that point, benefits would rely entirely on incoming payroll taxes, resulting in an automatic cut of approximately 21 percent, unless Congress intervenes.
What To Know
The size of future Social Security benefit cuts would vary significantly depending on a couple’s age, marital status, and employment history. Dual-earner couples with low incomes would face a slightly smaller cut of around $11,000 per year, while high-income couples might experience reductions approaching $24,000 annually.
While the dollar amount is lower for low-income couples, the impact would be more severe relative to their total income and lifetime earnings.
These projected reductions are higher than those outlined in the latest Social Security Trustees’ report, which projected a 21 percent cut in benefits if no solution is found. The CRFB calculations are based on a 24 percent cut, due to the recent passage of the One Big Beautiful Bill Act (OBBBA), which include tax rate cuts and an expanded senior standard deduction.
The OBBBA ensures that almost 90 percent of Social Security recipients will no longer be required to pay income taxes on their benefits, according to the Social Security Administration (SSA).
“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,” CRFB said in its report. “If the expanded senior standard deduction and other temporary measures of OBBBA are made permanent, the benefit cut would grow larger.”
Social Security has weathered similar financial challenges before. In the early 1980s, the program neared insolvency, making Congress implement a series of reforms. These included increases in payroll taxes, gradually raising the full retirement age, and introducing taxes on a portion of Social Security benefits.
Stock image/file photo: A Social Security card with U.S. Dollars.
Stock image/file photo: A Social Security card with U.S. Dollars.
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What People Are Saying
The Committee for a Responsible Federal Budget said in its report: “Policymakers pledging not to touch Social Security are implicitly endorsing these deep benefit cuts for 62 million retirees in 2032 and beyond. It is time for policymakers to tell the truth about the program’s finances and to pursue trust fund solutions to head off insolvency and improve the program for current and future generations.”
Social Security Commissioner Frank Bisignano said in a news release earlier this month about the OBBBA: “This is a historic step forward for America’s seniors. For nearly 90 years, Social Security has been a cornerstone of economic security for older Americans. By significantly reducing the tax burden on benefits, this legislation reaffirms President Trump’s promise to protect Social Security and helps ensure that seniors can better enjoy the retirement they’ve earned.”
What Happens Next?
Lawmakers are offering proposals to shore up the system. Among them is the reintroduced Medicare & Social Security Fair Share Act from Senator Sheldon Whitehouse of Rhode Island and Representative Brendan Boyle of Pennsylvania, both Democrats. Their bill would impose payroll taxes on wages and investment income exceeding $400,000.
A bipartisan effort comes from Republican Senator Bill Cassidy of Louisiana and Democratic Senator Tim Kaine of Virginia, who have proposed establishing a $1.5 trillion investment fund for Social Security. The Treasury would front the funding, which would be invested across a broad portfolio of stocks, bonds, and other assets to generate higher long-term returns. After 75 years, the Treasury would be repaid, and the accumulated gains would be directed toward supporting Social Security benefits.