There's More Than One Way to Cut Social Security – 3 Ways Seniors Could Get Less in the Future

In less than a decade from now, your Social Security benefit could face a substantial cut unless Congress acts to prevent it.

On the bright side, proposals are beginning to emerge that would shore up Social Security’s finances.

Ironically, however, some of these fixes would reduce benefits for specific groups of seniors, possibly impacting where you stand financially during retirement.

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Why Social Security is in trouble

Social Security’s financial woes are well-documented.

The program’s Old-Age and Survivors Insurance (OASI) trust fund is projected to run out of money by the end of 2032, according to the latest Social Security Administration (SSA) trustees annual report.

If that occurs, payroll tax revenue would only fund about 78% of scheduled benefits, meaning retirees could face a substantial benefit cut.

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How proposed fixes might hurt some seniors

As the clock ticks down toward this doomsday for benefits, organizations and politicians in Washington, D.C., are offering ideas for potential fixes.

However, some of these proposals would result in reduced payments to specific groups of retirees.

Here are the fixes that could hurt some seniors. It is important to note that these are merely proposals and have not become enacted law. There is no guarantee any of them will become law at any point.

A direct benefit cap

Earlier this year, the Committee for a Responsible Federal Budget proposed capping annual Social Security benefits at $50,000 for singles and $100,000 for couples.

In effect, this would be a benefit cut for the program’s wealthiest recipients. If it became law today, it would impact about 1 million Social Security beneficiaries, although the number of affected recipients would likely grow over time.

The committee says this change would save Social Security up to $190 billion over a decade and close 20% or more of the program’s current solvency gap.

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Raising the full retirement age above today’s 67

Full retirement age is the point at which you can claim 100% of your Social Security benefit without being hit with an early claiming penalty that reduces your monthly payout.

Back in 2024, a House of Representatives Republican Study Committee (RSC) proposal suggested raising the full retirement age for Social Security from its current 67 to 69.

Other organizations, such as the Bipartisan Policy Center and the Stanford Institute for Economic Policy Research (SIEPR), have championed a similar approach.

However, such a move would function as a benefit cut for younger workers who would face early claiming penalties for a longer period than they would today.

It’s important to note that when you claim early and are penalized with a lower monthly payment, this penalty remains in place for as long as you continue to receive Social Security.

Changes to how benefits are taxed

In recent years, there has been a push to eliminate taxes on Social Security benefits. But the Committee for a Responsible Federal Budget says increasing taxes on benefits would be more helpful to ensuring the program’s future.

Currently, up to 85% of benefits are taxable, but only for beneficiaries who achieve specific income levels. The committee has floated the idea of taxing 85% or 90% or more of all benefits.

In the end, that means more of a Social Security beneficiary’s benefit would end up with Uncle Sam, which is effectively a benefit cut by another name.

What this means for seniors

Much of the chatter surrounding Social Security’s financial troubles focuses on how benefits could be cut sharply across the board.

However, it is more likely that Congress will fix the problem before it gets to that stage. With that in mind, it is important to pay attention to how a potential fix might reduce benefits for some groups of seniors.

In that sense, the reality is that a “cut” to Social Security benefits can arrive in disguise and go beyond the reduction that people talk about today.

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How to prepare for possible Social Security benefit cuts

There is little you can do to stop the government from cutting Social Security benefits for some or all retirees.

However, increasing your savings and building a bigger nest egg are things that are completely within your control.

With any luck, you will not suffer any cuts to your benefits, whether you are retired now or whether you still have decades of work ahead of you. But the best way to prepare for any eventuality is to start saving more today.

Bottom line

The day of reckoning for Social Security is approaching. Unless Congress does something, benefits could be slashed across the board.

However, some of the proposed fixes to this problem also would result in some seniors seeing expected payouts reduced. Rather than worry about where Social Security is headed, take charge of your financial future.

A part-time job or side hustle can put extra cash in your pocket. Or, simply trim your spending and boost savings so you will be ready regardless of what the future holds.

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