Social Security crisis: Beneficiaries face 21% benefit cut without reforms, says CFRB
A new report finds that Social Security recipients face a 21% cut when a crucial trust fund that's on pace to be depleted in 2033 runs dry and that neither of the leading contenders in this year's presidential election has articulated a plan to stabilize the program.
The nonpartisan Committee for a Responsible Federal Budget (CRFB) noted in its report that Social Security is currently paying more in benefits than it receives in payroll taxes, which is depleting the reserves in the Old-Age and Survivors Insurance (OASI) Trust Fund that allows the program to pay out full benefits to retirees.
By law, when the trust fund is depleted, Social Security can only pay out benefits equal to what it receives in payroll taxes. The program's trustees project that trust fund reserves will be tapped out in the fourth quarter of 2033, at which time today's 58-year-olds will reach the typical retirement age and today's youngest retirees turn 71.
In effect, that means there will be a mandated 21% across-the-board Social Security benefit cut for retirees starting in late 2033. That would amount to a $16,500 nominal benefit reduction for a typical dual-income couple who retired at the time of the trust fund's depletion, or a $12,400 reduction for a typical single-income couple, according to CRFB.
The size of the benefit cut would vary for retirees based on their age, work history and lifetime incomes, as a low-income couple as defined by Social Security trustees would see a $10,000 benefit cut while a high-income couple would see a $21,800 cut, CRFB found.
For context, the estimated average Social Security benefit changes monthly, and the average benefit as of January 2024 was $1,907. A 21% reduction to that baseline amounts to a cut of $400 a month, leaving the benefit amount at $1,507.
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CRFB noted that the automatic cut will grow over time from 21% in 2033 to 31% by 2098 because of the widening gap between the benefits Social Security recipients are slated to receive and incoming tax revenue.
The report comes as the two leading presidential candidates, Democratic nominee Vice President Kamala Harris and Republican nominee former President Trump, have each said they will protect Social Security from benefit cuts. However, neither has put forward a plan to reform the program ahead of the trust fund's depletion.
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CRFB also noted that Trump's plan to end the taxation of Social Security benefits would reduce revenue receipts to move up the insolvency date of the OASI trust fund by more than one year to early 2032.
"Both major party candidates for the presidency having no meaningful plan to save Social Security from insolvency is an egregious example of fiscal irresponsibility," CRFB President Maya MacGuineas told FOX Business in a statement. "In less than a decade, Social Security will face insolvency, and the automatic benefit cuts that follow will mean the average dual-income couple will have $16,500 less per year than if our nation's leaders had taken this issue seriously."
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"Saying the word 'protect' is not enough — both today's seniors and tomorrow's future retirees deserve to know specifically what will be done to prevent these cuts from happening," MacGuineas added.