Social Security Fund Set to Run Dry, Leaving Retirees Facing $18K Cuts Each Year

Social Security Fund Set to Run Dry, Leaving Retirees Facing $18K Cuts Each Year

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A recent analysis warns that a major source of income for millions of retirees could be significantly reduced within the next decade. According to the Committee for a Responsible Federal Budget (CRFB), retirees could face substantial cuts to their Social Security benefits if Congress does not act soon.

The Projected Social Security Benefit Cuts

The CRFB estimates that a couple retiring in 2033 with a medium dual income could lose up to $18,100 per year in Social Security benefits. For a single-income couple, the loss would be around $13,600 annually. These cuts would vary depending on factors such as age, marital status, and employment history.

For example, a low dual income couple could experience a loss of $11,000 per year, while a low single-income couple might see their benefits cut by $8,200 annually.

The CRFB projects that by late 2032, Social Security benefits could face an overall reduction of about 24%, which is even higher than the 23% cut projected by the latest Social Security Trustees report for 2033.

The Role of the One Big Beautiful Bill (OBBB)

The CRFB’s more pessimistic projections are partly based on changes brought by the recently passed One Big Beautiful Bill (OBBB). This bill includes major tax cuts and an expanded senior standard deduction.

While this helps reduce the tax burden on Social Security benefits (meaning about 90% of recipients would no longer need to pay income taxes on their benefits), the CRFB warns that this could have negative consequences for the future.

According to the CRFB, these tax breaks could lead to a significant reduction in Social Security’s revenue from income taxation. If the expanded senior standard deduction and other temporary measures from the OBBB become permanent, the cuts to Social Security benefits would become even more severe.

A Call to Action from the CRFB

The CRFB urges lawmakers to take action now to prevent a 23% across-the-board benefit cut for retirees in just eight years. “If policymakers fail to act, they will effectively be supporting a 23% cut for all retirees,” the CRFB warned.

However, the organization also noted that there is still time to enact solutions that would protect the long-term stability of the program.

Proposed Solutions for Social Security Insolvency

To address the potential Social Security insolvency issue, several lawmakers have proposed different approaches. For example, Senator Bill Cassidy (Louisiana) and Senator Tim Kaine (Virginia) have suggested creating a $1.5 trillion Social Security investment fund, backed by the U.S. Treasury.

This fund would invest in stocks, bonds, and other assets to generate additional revenue for Social Security.

Meanwhile, Senator Sheldon Whitehouse (Rhode Island) and Representative Brendan Boyle (Pennsylvania) have introduced a bill that would impose payroll taxes on wages and investment income exceeding $400,000.

This would generate more revenue for Social Security, especially from higher earners who currently contribute less relative to their income.

Time Is Running Out

The future of Social Security benefits is uncertain, and without prompt action, retirees could face significant cuts to their income in just a few years. While the current tax breaks might provide short-term relief, they could lead to a long-term financial crisis for the Social Security system.

The CRFB urges lawmakers to act quickly and responsibly to ensure the program remains sustainable for future generations.

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