Social Security Warning Issued Over $18,000 Benefit Cut
A new warning from budget experts says millions of future retirees could face steep Social Security benefit cuts, amounting to roughly $18,000 a year for some households if Congress fails to act before the program’s retirement trust fund runs out of money.
The Social Security Old‑Age and Survivors Insurance (OASI) trust fund is less than seven years from insolvency, according to testimony submitted this week to the Senate Budget Committee by the Committee for a Responsible Federal Budget (CRFB).
Under current law, insolvency would trigger an automatic 24 percent across‑the‑board cut in benefits once the trust fund’s reserves are depleted.
“To put it bluntly, Social Security is going broke, and this statement suggests we need to plan for some combination of increased funding and decreased benefits,” Drew Powers, the founder of Illinois-based Powers Financial Group, told Newsweek.
Why It Matters
Social Security provides retirement, disability, and survivor benefits to tens of millions of Americans, and for many retirees, it represents their primary source of income. A sudden 24 percent cut could significantly alter retirement plans and living standards, particularly for households with limited savings.
What To Know
CRFB estimated that the 24 percent cut would translate into about $18,400 in lost annual benefits for a typical dual‑income couple retiring in 2033, shortly after the projected insolvency date.
Federal law requires Social Security to pay benefits only from incoming payroll tax revenue once its trust fund reserves are exhausted. That means benefits would not stop entirely, but they would be reduced immediately to match available revenue.
“The Social Security retirement fund is less than seven years from insolvency,” CRFB wrote in its submission for the Senate hearing. “With insolvency less than seven years away, timely action is needed to save Social Security. The time to start is now.”
If Congress takes no action, CRFB says the resulting reduction would be uniform across beneficiaries, regardless of income level or work history, because the cuts would be applied mechanically under existing law.
“It is very likely we will see an increase in taxes paid into the system, expanded means testing for higher net worth families, and an age adjustment for both full and partial benefits. It is also possible we will experience other structural reforms, such as an adjustment to the benefits calculation,” Powers said.
“Bottom line: If we don’t act, Social Security will fail to live up to its promises.”
While higher‑income households would lose more dollars in absolute terms, lower‑income retirees would be hit harder as a share of their income, potentially increasing financial insecurity among seniors.
The CRFB also warned that recent legislation has contributed to Social Security’s growing shortfall, accelerating the program’s path toward insolvency.
In its written testimony, the group said changes affecting federal revenue, including provisions that reduce taxes on Social Security benefits, have weakened the program’s financing and made the projected benefit cuts larger once insolvency occurs.
The One Big Beautiful Bill Act (OBBBA) increased Social Security’s shortfall further by reducing revenue flowing into the Social Security Trust Fund from the income taxation of benefits, the committee said.
Based on their estimates, which were subsequently confirmed by the Social Security Chief Actuary, OBBBA will cost the trust funds $170 billion over 10 years and widen its 75-year imbalance by 0.16 percent of payroll.
“Taken together, these laws advanced Social Security’s insolvency date by nearly a full year and significantly worsened its long-term financial outlook,” the CRFB statement said.
What People Are Saying
Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: “We’ve been talking about Social Security solvency for years, yet here we are, more pressure on the system and no real fix. At some point, the math has to matter. If nothing changes, cuts aren’t a question of if, but when. More than likely, the next administration gets stuck holding the bag, and that comes with the one word nobody wants to hear: taxes. A payroll tax increase is the most probable lever to pull.”
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: “For many Americans, that cut would be disastrous. A typical couple receiving benefits on or after 2033 could see a cut of up to $18,400 annually. Despite a wide array of retirement investment products, for most Americans, Social Security remains a pivotal part of their retirement income. Failure to protect it would result in millions of America’s seniors almost instantaneously being thrown into poverty.”
Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek: “Allowing the cuts to occur could at least double the poverty rate among older Americans.”
“So what happens when the cuts hit? A 24 percent reduction forces more older Americans to delay retirement, claim later than planned, return to work, draw down savings faster, or cut back on essentials like housing, food, and medical spending.”
What Happens Next
No legislation has yet been advanced to close the Social Security funding gap.
Without congressional action, CRFB projects the Social Security retirement trust fund will become insolvent in 2032, triggering benefit cuts for those retiring shortly thereafter
“If nothing is done, expect meaningful benefit reductions, call it 20–30 percent once the trust fund runs dry. That’s not theoretical,” Thompson said. “For many retirees, Social Security is the foundation of their income. A cut of that size doesn’t just hurt, it forces real lifestyle changes and increases the risk of poverty across the senior population.”
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