A MAJOR source of income for millions of retirees could be depleted within the next ten years, according to an analysis.
The Committee for a Responsible Federal Budget (CRFB) estimates that a couple retiring in 2033 and making a medium dual income could lose up to $18,100 in Social Security benefits per year if Congress fails to act.
Future retirees could be looking at smaller checks[/caption]
That translates to $13,600 for a single income couple.
Potential benefit cuts would vary widely based on age, marital status, and employment history.
A low dual income couple, for example, could face a cut of $11,000 per year, according to the CRFB.
And a low single income couple could take a hit of about $8,200.
The CRFB estimates an overall cut of about 24 percent in late 2032.
That’s actually higher than the cut calculated by the latest Social Security Trustees report – which is looking at a cut of about 23 percent in 2033.
DOUBLE EDGED SWORD
The CFRB’s grimmer estimates are based on changes made by the recently passed One Big Beautiful Bill (OBBB).
The OBBB brings about major tax cuts and an expanded senior standard deduction.
The Social Security Administration states that about 90 percent of recipients would no longer need to pay income taxes on their benefits.
“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,” Social Security Commissioner Frank Bisignano said in a press release.
But the CRFB warns that these current breaks could lead to a shaky future for retirees.
The organization says these measures could severely reduce Social Security’s revenue from income taxation of benefits.
“If the expanded senior standard deduction and other temporary measures of OBBBA are made permanent, the benefit cut would grow larger,” the CFRB said in its report.
How Social Security Works and its Future
Social Security provides retirement benefits for millions of Americans.
Social Security is financed by two federal trust funds: the Old-Age and Survivors Insurance (OASI) trust fund and the Disability Insurance (DI) trust fund.
These two trust funds are financed through a combination of payroll taxes and government reserve funds.
But according to the Administration’s latest Trustee’s report, these funds would be insolvent by 2034 under current law.
From there, they would be funded solely from payroll taxes.
That would lead to a 21 percent cut in benefits across the board, according to the Administration’s analysis.
The CRFB is now calling on lawmakers to take action.
“If policymakers fail to act, they will effectively be supporting a 23 percent across-the-board benefit cut for all retirees in just eight years,” the CRFB said in its report.
“Fortunately, there is still time for policymakers to enact pro-growth solutions that protect the long-term viability of the program.”
NEXT MOVE?
Some lawmakers have proposed different approaches to solving the Social Security insolvency issue.
Senator Bill Cassidy of Louisiana and Senator Tim Kaine of Virginia have proposed a $1.5 trillion Social Security investment fund supported by the Treasury.
This fund would invest in stocks, bonds and other assets.
Senator Sheldon Whitehouse of Rhode Island and Representative Brendan Boyle of Pennsylvania have proposed a bill that would trigger payroll taxes on wages and investment income exceeding $400,000.
