You’ve likely heard that the Social Security trust fund is on track to deplete its reserves by 2033, which—if no action is taken between now and then—would mean cutting benefits for Social Security beneficiaries by 23% a decade from now.
What you may not have seen before now is just how much that looming 23% cut would translate into actual dollars. Now you can, thanks to a new report from the nonpartisan Committee for a Responsible Federal Budget (CRFB).
“For a typical dual-income couple retiring in 2033, we estimate this would represent an immediate $17,400 cut in current dollar annual benefits and an immediate $13,100 cut for a typical single-income couple,” the report states.
That’s a monthly cut of $1,450 for dual-income couples, or $1,092 for single-income couples. The analysis doesn’t forecast the impact on newly retired single earners. The current average monthly benefit check for single earners is about $1,800, according to the Social Security Administration.
The Social Security Board of Trustees annual report released at the end of March revealed that the Old-Age and Survivors Insurance and Disability Insurance (OASI) trust fund, which currently pays benefits to about 57 million Americans, will become depleted by 2033 unless changes are made. At that time, today’s 57-year-olds are reaching the normal retirement age and today’s youngest retirees turn 72.
Upon insolvency, federal law mandates that the OASI trust fund can only spend in amounts equal to incoming trust fund revenue, which means that all 70 million (projected) retirees, dependents, and survivors—regardless of age, income, or need—will see their benefits cut by 23%.
According to the CRFB analysis, the benefit cuts would differ for couples at different income levels. A low-income, dual-income couple retiring in 2033 would see a $10,600 cut while a high-income, dual-income couple retiring in 2033 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 report states.
Importantly, the figures above are in current (nominal) dollars, consistent with 10-year budget scoring practices and how benefit cuts would be seen in real time. Adjusted for inflation, the report estimates a typical dual-income couple would face a $14,000 cut, while low-income couples would face a $8,500 cut and high-income couples would face a $18,500 cut.
While the CRFB does not support or oppose any candidate for public office, the report does say 2024 presidential election candidates who pledge “not to touch” Social Security are not doing the troubled program any favors.
“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 report concludes.
Social Security turned 88 on Monday. President Franklin Delano Roosevelt signed the first Social Security Act into law on Aug. 14, 1935.
SEE ALSO:
• Americans in High-Cost Cities Could See Smaller Social Security Benefits
• 2024 Social Security COLA Watch: Latest Forecast Steady at 3%
• House Republicans Propose Social Security Benefit Cuts
• 3 Proposals to ‘Fix’ Social Security
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
