Are You Ready to Kiss 21% of Your Social Security Benefit Goodbye in 9 Years?

Sweeping Social Security benefit cuts may await retired workers and survivor beneficiaries by 2033. The monthly benefits most retirees receive from Social Security are vital to their financial well-being. For the last 22 years, national pollster Gallup has surveyed retired workers to gauge how reliant they are on the Social Security income they receive. Over these two-plus decades, between 80% and 90% of respondents have consistently noted that it’s a “major” or “minor” income source, and therefore needed to make ends meet. Unfortunately, this foundational social program finds itself on ever-shakier financial ground, and current/future beneficiaries are the ones who could pay the price.

Sweeping Social Security benefit cuts may be less than a decade away

Every year since the first retired-worker benefit was mailed out in January 1940, the Social Security Board of Trustees has released a report that extensively details the revenue and spending of America’s top retirement program in the previous year. Perhaps more importantly, the annual Trustees Report estimates the impact of fiscal and monetary policy, along with prevailing demographic changes, to determine how financially “healthy” Social Security will be over the short term (10 years following the release of a report) and long term (75 years after the release of a report). Beginning in 1985, the Trustees began pointing to an estimated long-term funding obligation shortfall. In other words, forecast revenue collection in the 75 years following the release of a report was expected to be insufficient to cover outlays. These are predominantly benefit payments but also include nominal administrative expenses to operate Social Security. Recently, the 2024 Social Security Board of Trustees Report pointed to yet another widening of the program’s cash shortfall. Through 2098, Social Security is estimated to be short of its funding needs by $22.6 trillion, which is $200 billion greater than what was forecast in the previous report. I want to be crystal clear that this funding obligation shortfall in no way means Social Security is bankrupt or insolvent. Based on how the program is currently funded (95% of revenue comes from payroll taxes and the taxation of benefits), it mathematically can’t go bankrupt or become insolvent. However, there’s the very real possibility that the existing payout schedule, including the cost-of-living adjustments (COLAs), won’t be sustained much longer. The more immediate concern for current and future beneficiaries is that the Old-Age and Survivors Insurance Trust Fund (OASI), which is responsible for making payments to over 50 million retired workers and roughly 5.8 million survivor beneficiaries each month, could exhaust its asset reserves by 2033. If this excess capital built up since inception is completely depleted, sweeping benefit cuts of up to 21% may be needed to sustain payouts through 2098 without the need for any further reductions. In simple English, retired-worker beneficiaries and survivors receiving benefits could be just nine years from a major haircut to their monthly Social Security income.