While we wait for the new annual Social Security Trustees Report to be released in the coming days, a new report from the Committee for a Responsible Federal Budget has some grim projections on what will happen if the Social Security retirement trust fund becomes exhausted—which is widely being projected to happen as soon as 2032 absent Congressional action to address the problem.
The new report, “No State Spared: Mapping the Impact of Social Security’s Insolvency,” finds Social Security beneficiaries are projected to be subject to an immediate 24% benefit cut upon trust fund exhaustion. That would mean average monthly benefit cuts would surpass $500 in 29 states. The average Social Security check for retired workers was $2,081 as of April, according to the Social Security Administration (SSA).
“If Social Security becomes insolvent in 2032, as currently projected, retirement benefits would need to be cut by an estimated 24% in order to bring spending in line with revenues. Applying this projected reduction to current state-level data, we estimate an across-the-board monthly cut would range from $459 to $556 across the 50 states and the District of Columbia,” the report states.
Nationally, the average monthly cut would total $500, which the report says is more than what the average retired household spends on groceries each month. Retirees in Connecticut (average benefit cut of $556), Delaware ($549), Maryland ($541), New Hampshire ($553), and New Jersey ($554) face the largest monthly reductions.
CRFB says one in five Americans—63 million in total—would be impacted if Social Security’s retirement program faced a 24% cut today. This includes 54 million retired workers and 9 million survivors and dependents. Between 10% and 23% of each state’s population would be affected by the cut, with the largest share facing benefit cuts in Maine (22.9% of population impacted), West Virginia (22.4%), Vermont (22%), Delaware (21.1%), Montana (21%), and New Hampshire (21%).
At the national level, a 24% reduction in Social Security benefits today would amount to $345 billion this year, or 1.1% of GDP—with the state impact ranging from 0.2% to 1.9% of GDP. In 40 states, the cuts would exceed 1% of GDP with West Virginia (1.9%), Mississippi (1.8%), and Vermont (1.8%) facing the steepest losses, followed by South Carolina (1.7%) and Maine (1.7%). States that would be the most impacted are those that have older populations and lower per-person incomes.
“No state would be spared from the potentially devastating effects of insolvency,” the CRFB said in the report. “With less than seven years until Social Security is projected to be insolvent, policymakers need to enact changes to the program as quickly as possible to protect against these scenarios.”
Bipartisan commission proposed
Also this week, Rep. Gus Bilirakis (R-FL) reintroduced the Commission on Sustaining Medicare and Social Security Act. The bill would create an independent, bipartisan commission of experts tasked with identifying solutions to ensure the long-term financial stability of both Medicare and Social Security and providing recommendations to Congress for action.
The bill is in response to the significant fiscal challenges facing both the Medicare Hospital Insurance Trust Fund and the Social Security Trust Fund, which are projected to become insolvent in the coming years if Congress fails to act. Without meaningful reforms, a press release announcing the bill said beneficiaries could face reductions in benefits that millions of Americans rely upon for their health care and retirement security.
“Medicare and Social Security represent a sacred promise to America’s seniors, disabled individuals, and working families who have paid into these programs throughout their lives,” Bilirakis said. “We have a moral responsibility to preserve and strengthen these vital programs, not only for today’s beneficiaries but for future generations as well. The longer we wait to address these challenges, the fewer options we will have and the more difficult the solutions will become.”
The Commission would conduct a comprehensive review of both programs’ financial outlooks, evaluate policy options, and provide Congress with recommendations aimed at ensuring Medicare and Social Security remain strong and sustainable for decades to come. Additionally, the Commission would evaluate whether or not the current formula for calculating annual cost of living adjustments (COLAs) accurately reflect the financial realities facing seniors, including inflation.
“By bringing together experts from across the political spectrum, we can remove partisan politics from the conversation and focus on practical, responsible solutions,” Bilirakis said. “We have done this before. In the early 1980s, President Ronald Reagan and Speaker Tip O’Neill worked across party lines to preserve Social Security through a similar commission process. Their efforts succeeded because they put the American people ahead of politics. I believe we can do so again.”
SEE ALSO:
• Social Security Administration Faces Turmoil After 8,000+ Staff Cuts
• Americans Want Affluent to Foot the Bill for Social Security Fix
• AARP Official Stresses Need for Social Security Reform
• 2025 Social Security Trustees Report Shows 23% Benefit Cut on Tap by 2033