Social Security is approaching a fiscal cliff that could ultimately result in steep cuts to benefits for 70 million Americans, with a recent study showing that the typical couple would face a $16,500 annual payment reduction in 2033. analysis From the Committee for a Responsible Federal Budget.
Benefits for a middle-income single worker would be cut by $8,200 a year, according to the group, a nonpartisan advocacy group focused on fiscal issues.
The analysis assumes moderate career earnings — a dual-income couple with an individual annual salary of about $63,000. Notably, it assumes that Social Security is not repaired before the trust fund is projected to go bust in 2033, an outcome that many experts have long argued is unlikely given the political impact that benefit cuts would have on both parties.
The Social Security fund, known as the Old-Age and Survivors Insurance (OASI) Trust Fund, is a $2.6 trillion pool of money that covers benefits and other program costs. Social Security currently pays out more in benefits than it receives in taxes. The wave of baby boomer retirementsThe agency currently relies on a trust fund to provide promised benefits to retirees.
The clock is ticking
But without changes, the trust fund is set to run dry by 2033, which would result in an automatic 21% cut in beneficiaries' monthly checks, regardless of their marital or income status, the CRFB analysis found. This could be a devastating blow to both current and future retirees, many of whom are already struggling financially, with four in 10 seniors Living Alone The average monthly Social Security benefit is $1,907.
“This outcome will likely lead to a sharp increase in poverty rates among seniors,” Shannon Benton, executive director of the advocacy group Senior Citizens League, told CBS MoneyWatch. “Low-wage workers are less likely to save for retirement than higher-income Americans, and therefore more likely to rely on Social Security in later life.”
Chris Towner, policy director at CRFB, said the longer lawmakers take to fix the system, the more unstable Social Security will become.
“Waiting to improve the system is costly,” he said. “We could improve it now with a 27 percent tax increase or a 21 percent cut in benefits for all beneficiaries, but waiting would mean the tax increase would increase to 32 percent and the cut would increase to 25 percent.”
Social security cuts by income
Social Security is facing financial difficulties, but experts warn that many Americans misunderstand what a failed system would mean. For example, a recent Gallup poll found that about 8 in 10 U.S. adults worry that Social Security will be “unavailable” when they reach retirement age.
But Social Security isn't going away, stressed Nancy Altman, president of Social Security Works, an advocacy group for the program. Even if the trust fund dries up, the program will continue to be funded by workers' payroll taxes, which will still pay out about 79% of promised benefits, she noted.
“There's a lot of misinformation out there that this program is going to go away, but that's not going to happen,” Altman said. “The best way to look at it is, [possible insolvency] “This is a call to action. It's not that they don't have any benefits, but Congress really needs to act to avoid cuts.”
If the trust fund dries up, retirees and other beneficiaries would receive checks, but because of the funding shortfall, the amount paid out would be about 79 cents for every promised benefit dollar.
That means that a middle-income single worker making about $63,400 a year would see his or her Social Security benefits reduced from $3,275 a month before bankruptcy to about $2,592 a month without the strengthened trust fund — a reduction of $8,200 in annual Social Security benefits.
So how likely are cuts to Social Security?
Deep cuts to Social Security are highly unlikely to become a reality, predicts Altman of Social Security Works, in part because Social Security is seen as a political “third wire” that could motivate voters to oppose lawmakers who are perceived as sitting idly by the program as it burns down.
“It's completely inconceivable that Congress would not act,” Altman said. “They would all be voted out. People would be outraged.”
Lawmakers already have a number of proposals for how to shore up Social Security, ranging from raising taxes to cutting benefits or a combination of both.
Benton, of the Senior Citizens League, noted that so far, both Vice President Kamala Harris and former President Donald Trump have pledged to protect Social Security, but neither has offered a detailed plan for how they would do so.
“The Senior Citizens League would like to know what the presidential candidate will do to address the looming bankruptcy issue if elected,” she said.
Scope of the amendment
Trump has proposed eliminating income taxes on Social Security benefits, but his plan would actually worsening the program's financial outlook That's because these taxes currently go directly into benefits, and without them, experts say, the Social Security Administration would be forced to cut benefits a year sooner than currently projected.
By contrast, what's clear is that Congress needs to take steps to strengthen Social Security to avoid cutting benefits in 2033. Some lawmakers say: Elimination of income restrictions Regarding Social Security taxes: Currently, incomes over $168,600 are not subject to payroll taxes, so low- and moderate-income workers bear the burden of funding the program.
Meanwhile, some Republican lawmakers Raising the US Retirement Age They set the retirement age at 70 and argue that Americans are living longer and should delay it, but many workers are forced to retire much earlier than that because of health problems, job cuts or the inability to find new work.
“Closing the shortfall is a means to an end, and the end is to provide economic security,” Altman said, adding that he and other experts would like to see not only a stronger program but also more generous benefits. “Most experts believe benefits are too low.”
