Will Lawmakers Actually Let Social Security Cut Benefits? Here's the Scoop

It probably won’t surprise you to learn that Social Security is a key income source for millions of retired seniors today. But what may surprise you is that the program is at risk of broad benefit cuts in just about a decade’s time.

The problem stems from a pending financial shortfall.

Social Security gets most of its funding from payroll taxes. But in the coming years, baby boomers are expected to retire in drove, and a smaller number of workers will be coming in to replace them. That, combined with the fact that boomers will soon start drawing Social Security, puts a world of strain on the program.

Social Security has trust funds it can tap to keep up with its benefit obligations. But once those funds run dry, cuts will be on the table.

Recent estimates suggest that Social Security’s combined trust funds will be out of money by 2035. So as of now, that’s when benefit cuts could potentially happen.

But will they? That’s the big question. And while you should be aware that cuts are a possibility, they’re also by no means guaranteed.

Lawmakers don’t want Social Security cuts to happen

A broad reduction in Social Security benefits could have far-reaching consequences. A good number of retired workers today rely on Social Security as their only source of recurring income. If benefit cuts were to happen, many older Americans would be plunged into poverty, spurring a financial crisis among the elderly.

That’s not something lawmakers want. So it’s in their best interest to do what they can to prevent Social Security cuts.

It’s also worth noting that Social Security has, in the past, faced scenarios where benefit cuts seemed inevitable. But lawmakers managed to come through each time and stop that from happening. So there’s a good chance they’ll be able to come up with a solution in the next 10 years to keep benefit payments from shrinking.

The solution will come at a cost

While lawmakers have options to prevent Social Security cuts, each potential fix comes with its own built-in drawback. And there lies the challenge.

One option, for example, is to raise payroll taxes so that Social Security gets more funding. But working Americans are unlikely to welcome that change with open arms. And an increased tax burden could put a lot more near-term strain on households that are barely scraping by as it is.

Another option is to move back full retirement age for Social Security purposes. Right now, that age is 67 for anyone born in 1960 or later, but some lawmakers have proposed pushing it to 68 or 69. While that could pump much-needed revenue into Social Security, it could also effectively force millions of workers to delay retirement. So that, too, may not exactly be celebrated as an optimal solution.

All told, it’s fair to say that lawmakers have their work cut out for them in the context of preventing Social Security cuts. But they’ll likely be willing to do the work, because a widespread reduction in Social Security could have truly dire consequences.