Seniors who rely on their Social Security benefits could face a cut of $460 per month if Congress doesn’t act soon, according to digital news platform 24/7 Wall St.
Recipients who previously earned $2,000 a month would earn just $1,540 if Social Security trust fund reserves run dry as predicted in 2033.
Why It Matters
The Social Security Administration (SSA) has been facing an impending insolvency crisis which would see roughly 20 percent of benefits slashed for Social Security recipients by the early 2030s.
That would impact roughly 70 million people, including both seniors earning retirement benefits as well as those on Social Security Disability Insurance (SSDI) for monthly benefit payments.
What To Know
If Social Security’s trust fund reserves run out, the payroll taxes available would only be enough to cover 77 percent of benefits, 24/7 Wall St. reported.
For someone previously earning $2,000 monthly, that would equate to an income drop of $460 per month.
The Old-Age and Survivors Insurance Trust Fund has been anticipated to run out by 2033, and the amount of money coming in from today’s worker payroll taxes will not be enough to sustain benefits for retirees.
With the loss in benefits, many seniors are expected to lose money for necessities like housing, medical bills and groceries.
Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, said it’s unlikely that Congress and the SSA would allow a benefit cut to actually transpire for seniors who’ve spent their working years paying into the system.
“In no way do I expect Social Security to see a monthly benefit cut. The reality is simple: the people receiving Social Security actually vote and they show up consistently. No politician survives arguing for cutting benefits to the most reliable voting bloc in the country. That makes this scenario highly unlikely,” Thompson told Newsweek.
He continued: “At the same time, the government continues to spend aggressively in areas where the U.S. already leads the world by multiples, particularly military spending. Asking Americans to justify endless war spending while cutting support for their own citizens is not a tradeoff most people will tolerate over the long term.”
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, echoed Thompson’s sentiment.
“They know the alternative would be catastrophic for not just those affected by cuts, but their political careers, as well,” Beene told Newsweek. “However, it’s still a great reminder for soon-to-be retirees to not rely completely on that monthly check. Save in your 401k and IRA with the anticipation Social Security may be cut to make sure you’ll have enough to cover any possible funding gap.”
What People Are Saying
Jim Komoroski, a registered Social Security analyst and principal agent of The M1 Agency, told Newsweek: “The projected $460 monthly reduction is a realistic outcome if Congress does not act, but it ultimately comes down to political will. The funding shortfall has been known for years. It’s no secret, we just continue to kick the can down the road. The more we delay action we narrow the range of workable solutions. We also haven’t fully realized the impact AI will have as less workers pay into the system.”
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: “This is a perfect example of the old saying, ‘hope for the best, but prepare for the worst.’ Social Security remains one of – if not the- most popular program the federal government oversees, ensuring tens of millions of American seniors have some source of income in their golden years. However, part of that monthly check is funded by a long-standing trust fund that is expected to run dry in 2033. The good news is Congress may wait until the last minute, but they will find a solution that doesn’t involve cutting monthly benefits.”
What Happens Next
Komoroski said for workers nearing 62 years old, the uncertainty is a large risk.
“Social Security is unlikely to disappear, but it is also unlikely to remain unchanged. Especially for Gen X planning under the assumption of a reduced benefit is more prudent than relying on a last-minute legislative fix,” he said.