close
close

topicnews · September 6, 2024

New report: Without reform, social security benefits threaten to fall drastically

New report: Without reform, social security benefits threaten to fall drastically

play

How would you feel if you and your spouse lost $16,500 in income each year?

That’s how much a typical dual-income couple is estimated to lose in Social Security benefits when they retire, once the Old Age and Survivors Insurance (OASI) trust fund is exhausted in 2033, the nonprofit, nonpartisan Committee for a Responsible Federal Budget (CRFB) said in a new report Thursday. A typical single-income couple would lose $12,400, it said.

Because Social Security currently pays out more benefits than it collects in payroll taxes and other revenue, the program is drawing on its reserves in the OASI trust fund to cover the remaining cost of benefits. The fund only has enough reserves to cover 100% of benefits until the fund’s reserves run out in 2033. When that happens, the law caps benefits at the revenue coming in, essentially mandating a 21% across-the-board benefit cut for the program’s 70 million beneficiaries, CRFB said.

“Former President Donald Trump and Vice President Kamala Harris have both said they would ‘protect’ the Social Security program,” CRFB said. “However, neither has presented a plan to actually do so.”

Who will be the biggest loser?

According to the CRFB, low- and dual-income couples retiring in 2033 would lose $10,000 in benefits, compared to $21,800 for high-income couples.

“Although the cut for a low-income couple would be smaller, corresponding to a 21% reduction in their benefits, the cut would represent a larger proportion of their income,” it said.

Rollercoaster ride in social benefits: COLA estimate for 2025 falls with inflation, but high everyday expenses still burden seniors

It gets worse over time

If the government does not reform the program, the gap between revenue and benefits paid out will continue to grow, CRFB said. The 21 percent cut in 2033 will worsen to 31 percent by 2098, it said.

In addition, if Trump implements his plan to stop taxing Social Security without a plan to fully replace that revenue, the program would be further hampered, CRFB said.

Currently, only retirees whose “total income” is less than $25,000 per year ($32,000 for married couples) are exempt from taxes on Social Security benefits. Total income equals your adjusted gross income plus tax-free interest from instruments such as municipal bonds plus half of your Social Security benefit.

The CRFB estimates that social security tax revenues are expected to be around $94 billion this year.

Trump’s change would cause the Social Security pension fund to become insolvent more than a year earlier – in early 2032 instead of late 2033. In addition, the initial 21 percent cut would increase to 25 percent across the board, the CRFB said.

“Vague political promises to leave welfare untouched are meaningless,” Mary Johnson, a retired analyst with the nonprofit Senior Citizens League, said last month. “Voters need to be shown where the money is coming from to pay for our benefits.”

Medora Lee is a finance, markets and financial reporter for USA TODAY. Reach her at [email protected] and subscribe to our free Daily Money newsletter, which provides financial tips and business news every Monday through Friday morning.

You may also like...