The average retired couple would see a $17,400 Social Security cut in 2033 if the program is allowed to continue on its current path, according to a new report from the nonpartisan Committee for a Responsible Federal Budget (CRFB).
The CRFB’s analysis found that politicians’ promises not to touch the program would actually ensure a reduction in benefits across the board when the trust fund behind Social Security goes insolvent in a decade.
That fund, the Old-Age and Survivors Insurance (OASI) trust fund, is set to run through its reserves by 2033, just when people who are currently 57 years old retire at 72.
According to the analysis, once the OASI becomes insolvent, it will only be able to pay out an amount equivalent to what it receives in funding, meaning a 23% drop in Social Security benefits.
That would mean an annual $17,400 loss for the typical dual-income couple and a $13,100 reduction for those with a single income. Those numbers vary for low income ($10,600/$7,900) and high income ($23,000/$17,300) earners.
The authors point out that those numbers are in current dollars, and when adjusted for inflation low-, medium- and high-income couples would face $8,500, $14,000 and $18,500 cuts, respectively.
“Although the cut for a low-income couple would be smaller, it would represent a larger share of their income – and so senior poverty would rise significantly upon insolvency,” the report states. “Any 2024 presidential candidate who pledges not to touch Social Security is implicitly endorsing a 23 percent across-the-board benefit cut for the 70 million retirees when the Social Security retirement trust fund reaches insolvency in just a decade.”
There are few options available to keep the program healthy: raise taxes, raise eligibility age, cut costs or rely more on general revenues to cover the gap in funding, which could mean higher budget deficits or potential cuts to other programs.
All of the options are politically controversial.
Currently, full Social Security benefits are available at 67, an age minimum that’s increased by two years since the program was first created roughly 90 years ago.
Last October, the agency announced that Social Security recipients would get an 8.7% boost in their benefits in 2023, a historic increase prompted by record-high inflation.
Social Security is financed by payroll taxes collected from workers and their employers. The maximum amount of earnings subject to Social Security payroll taxes for 2023 is $160,200, up from $147,000 in 2022.