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.