Social Security: Newly Retired Couples May Lose $17K A Year From 2033
A typical, newly retired dual-income couple could lose nearly $17,000 in annual Social Security benefits beginning in 2033 if Congress does not take action to resolve the program’s funding crisis, according to a new report from the Committee for a Responsible Federal Budget (CRFB).
It comes as lawmakers face mounting pressure to address Social Security’s long-term funding challenges. Social Security’s retirement trust fund is projected to become insolvent in 2032, according to the program’s trustees. At that point, the law requires benefits to be cut by an estimated 22 percent to ensure the program’s costs do not exceed its revenues.
The CRFB, a nonpartisan think tank, analyzed the effect that such a reduction would have on newly retiring couples if the fund is exhausted in late 2032, noting that today’s 61-year-olds would be reaching their normal retirement age at that point.
What Cuts Would Retirees Face?
The size of the cuts would vary, based on a couple’s age, marital status and work history, according to the CRFB’s report.
A dual-earning, low-income couple would face a yearly cut of about $10,200, while a dual-earning medium-income couple would face losing $16,900 a year.
High-income, dual-earning couples would see cuts as large as $22,300 a year.
“While the absolute size of these cuts would be smaller for low-income couples than high-income couples, they would also be a larger share of total incomes for low-income retirees and hence more financially disruptive,” the CRFB’s report said.
And the longer Congress does not shore up funds, the bigger the cuts that Social Security recipients will face.
“These cuts are projected to grow over time due to the rising gap between Social Security’s costs and dedicated revenues,” the report said. “At the end of the century, annual benefit cuts are expected to reach 35 percent.”
Social Security’s insolvency “is no longer a crisis for future lawmakers to deal with; senators elected this year will be in office when Social Security’s retirement fund is exhausted,” the report said. “Absent Congressional action, retirees in every state will be impacted. The time to act is now.”
When Could Social Security Funds Run Dry?
The annual report from the Social Security Board of Trustees in June said Social Security’s combined trust funds—which cover old age and disability recipients—will be unable to pay full benefits beginning in 2034. After that, incoming revenue would cover about 83 percent of scheduled benefits.
The report said the Old-Age and Survivors Insurance (OASI) trust fund is projected to be depleted in the fourth quarter of 2032, with 78 percent of benefits payable at that time.
The OASI trust fund is the primary source of funding for Social Security retirement and survivor benefits. It pays monthly checks to retired workers, their dependents, and families of deceased workers.
The fund is financed mainly through payroll taxes paid by current workers and employers, with any surplus invested in U.S. Treasury securities. Those reserves have long helped cover the gap when benefit payments exceed incoming tax revenue. But in recent years, Social Security has been paying out more than it collects, forcing the fund to draw down its reserves—a trend that is central to the program’s long-term financing challenge.
Lawmakers have been under pressure to address Social Security’s funding crisis, as more than 70 million Americans receive Social Security benefits, and the program remains the primary source of retirement income for millions of households.
What Legislation Is Being Considered?
Earlier this week, a bipartisan group of senators unveiled the Protecting Retirement Opportunities and Maintaining Income Security for Everyone (PROMISE) Act.
The legislation would create a mechanism requiring lawmakers to vote on a plan to restore Social Security’s long-term finances after years of political gridlock.
“Congress has known about this challenge for more than a decade, but it has not taken up these politically challenging issues. And the longer Congress waits, the more difficult it will be to address this issue in the future,” Senator Dick Durbin, a Democrat and one of the lawmakers who introduced the bill, said in a statement.
“Our bipartisan proposal opens Congress to debate this issue in a transparent, fair, and bipartisan way. We were elected to solve problems—and there’s no greater problem than the solvency and future of Social Security.”
Another piece of legislation under consideration is the reintroduced Social Security 2100 Act, which would replace the current inflation measure used for Social Security’s Cost of Living Adjustment with the Consumer Price Index for the Elderly (CPI-E), an experimental index that gives greater weight to costs older Americans typically face, such as health care and housing.
It would also increase benefits by 2 percent and set the new minimum benefit to 125 percent of the federal poverty rate.
The Senior Citizens League (TSCL) has hailed the legislation as the “gold standard” for Social Security reform, saying it would shore up the program for an additional 32 years while acknowledging it is unlikely to pass.
“Although the Social Security 2100 Act is unlikely to pass in the current Congress, it should,” TSCL executive director Shannon Benton said in a statement.
“The bill is the gold standard for Social Security reform and accomplishes the majority of changes older Americans want to see for the program.”