A recent report from the Committee for a Responsible Federal Budget (CRFB) notes that American retirees could be at high risk of experiencing significant reductions in their Social Security benefits if urgent legislative reform is not implemented. The document, released last Thursday, estimates that a typical two-income couple could lose $16,500 annually in benefits when the Old-Age and Survivors Insurance (OASI) trust fund runs out in 2033.
The CRFB report indicates that couples with a single Social Security income (as a spouse) could experience a loss of $12,400 a year, a number based on analysis and projections about the current status of the Social Security program, which is paying out more benefits than it collects in payroll taxes and other income, using its reserves in the OASI trust fund to make up the difference.
Cuts to Social Security Benefits in Less Than 10 Years
As the CRFB report continues to warn, the fund only has enough reserves to cover 100% of benefits until 2033. Once these reserves are exhausted, the law would limit benefits to incoming income, which would result in a general cut of 21 % for the 70 million beneficiaries of the program.
Social Security Beneficiaries Could Lose Up to $21,800 a Year
The report details how these cuts would affect different income groups. Low-income and two-earner couples retiring in 2033 would lose $10,000 in benefits, while a high-income couple would face a loss of $21,800. The CRFB notes that although the cut for a low-income couple would be smaller in absolute terms, it would represent a larger proportion of their total income.
Later, the document details that the situation could worsen over time if the necessary and urgent legislative reforms are not implemented: the gap between Social Security Administration (SSA) income and benefits paid will continue to widen, and the initial cut of the 21% in 2033 could deepen to 31% in 2098.
Can These Heavy Cuts to Social Security Be Avoided?
The CRFB also analyzes the potential impact of certain policy proposals. For example, if former President Donald Trump’s plan to eliminate taxes on Social Security were implemented without a plan to fully replace that revenue, the program would be further affected.
Currently, only seniors with combined incomes below certain thresholds are exempt from paying taxes on Social Security benefits. Taxation of these benefits is estimated to raise around $94 billion this year, according to the CRFB.
Trump’s proposed change to his campaign platform would bring forward the insolvency of the Social Security retirement trust fund to early 2032, rather than late 2033. Additionally, the initial 21% cut would be deepened to 25% of the benefits.
Both Donald Trump and Kamala Harris have talked about “protecting” the Social Security system, however, neither has presented an effective and concrete plan to achieve this. Mary Johnson, a retired analyst for the nonprofit Senior Citizens League, has criticized “vague political promises” to leave Social Security benefits untouched.
Johnson argues that it is necessary to show voters where the funds will come from to avoid the collapse of the system and the need for cuts to maintain its solvency. For now, it is not known if the predicted cuts can be avoided, so it is necessary to be attentive to the political and social debate that this critical situation will unleash.
