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Retirement Planning > Social Security > Social Security Funding

Here's the Size of Social Security Cuts if Congress Doesn't Act Soon: CRFB

By John Manganaro

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What You Need to Know

  • Social Security’s primary retirement trust fund will deplete its reserves by 2033, triggering benefit cuts of about 23%.
  • For a typical dual-income couple retiring in 2033, this would represent an immediate $17,400 drop in annual income.
  • While the cuts would differ depending on clients’ income levels, any income reduction can strain the budget of retirees.

The primary trust fund used to support the payment of Social Security retirement benefits is on track for depletion as soon as 2033, and if no action is taken before that time, beneficiaries will face an immediate 23% across-the-board benefit cut.

According to a new analysis published by the Committee for a Responsible Federal Budget’s U.S. Budget Watch 2024 project, this will represent a benefit cut of some $17,400 for a typical newly retired dual-income couple in 2033.

As the CRFB points out, today’s 57-year-olds will reach their normal retirement age in 2033, while today’s youngest retirees will turn 72.

As such, the analysis warns, these anticipated benefits cuts are not something that will only affect people in some far-off future. Instead, they are a real and pressing financial planning issue that should be concerning to all of today’s workers and retirees.

The new analysis urges policymakers to set aside their political differences and prioritize the reform and stabilization of the Social Security system, which serves today as one of the three main legs of the “retirement stool” alongside private savings and income from pensions.

Should they fail to “save” Social Security, the CRFB warns, the pain will be felt by individual retirees and by stakeholders across the entire U.S. economy.

Painful Projected Cuts

According to the CRFB’s analysis, upon insolvency, current law mandates that Social Security’s old age survivor insurance (OASI) trust fund can only spend in amounts equal to incoming trust fund revenue.

This implies that all 70 million retirees, dependents and survivors will see benefit cuts in 2033, regardless of their age, income or need.

As noted, for a typical dual-income couple retiring in 2033, the CRFB estimates cuts of about $17,400 in current dollar annual benefits. For a typical single-income couple, the projected dollar-figure cut is in the realm of $13,100.

The CRFB’s analysis notes that the cuts would differ depending on clients’ income levels, but any income reduction can strain retirees’ budgets.

Specifically, a low-income, dual-income couple retiring in 2033 would see a $10,600 cut, according to the CRFB. A high-income, dual-income couple retiring in 2033, on the other hand, would see their annual benefits slashed by $23,000.

“Although the cut for a low-income couple would be smaller, it would represent a larger share of their income, and so senior poverty would rise significantly upon insolvency,” the CRFB warns.

Crafting Consensus

After establishing these specific estimates, the new CRFB analysis seeks to tie the Social Security solvency issue to the current political moment in the U.S., arguing that Social Security’s funding shortfall should not be viewed as a partisan issue.

“Any 2024 presidential candidate who pledges not to touch Social Security is implicitly endorsing a 23% across-the-board benefit cut for the 70 million retirees when the Social Security retirement trust fund reaches insolvency in just a decade,” the analysis suggests.

Despite the looming cuts, the CRFB says, federal office candidates at all levels are facing pressure to pledge “not to touch Social Security.”

“While this pledge is framed as ‘protecting benefits,’ it is, in reality, an implicit endorsement of a [benefit cut],” the CRFB argues.

Ultimately, the analysis posits, the winner of the 2024 presidential election will face a Social Security trust fund rapidly approaching insolvency.

The good news, according to the CRFB and other research groups and advocacy organizations, is that lawmakers have a broad continuum of policy options that would close or reduce Social Security’s long-term financing shortfall.

Additionally, experts agree that implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits, thereby reducing the pain felt by individual stakeholders.

Credit: Shutterstock 

John Manganaro

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