Social Security recipients stand to lose more than a fifth of their annual benefits beginning in 2033 because of significant reserve depletion in the federal program, according to a recent report released by a nonpartisan policy analysis organization.
“The Social Security program is currently paying out more in benefits than it collects in payroll tax and other revenue, and it is drawing down its reserves to cover the remaining cost of benefits,” a Sept. 5 report by the Committee for a Responsible Federal Budget (CRFB) stated. “The program’s Trustees project that the OASI trust fund—which funds retirement benefits—will deplete its reserves in the fourth quarter of 2033.”
Once the reserves are depleted, a 21 percent cut, as required by law, will be implemented for the 70 million beneficiaries of Social Security, CRFB stated.
A typical dual-income couple is estimated to see an annual benefit reduction of $16,500, while for a single-income couple, benefits will be reduced by $12,400.
Benefit cuts would vary depending on the age, lifetime incomes, and work history of the retirees, the group noted. For instance, a low- and dual-income couple retiring in 2033 is expected to see a $10,000 reduction in benefits, while a high-income couple’s benefits are expected to be cut by $21,800. Even though the former’s benefit cut is smaller in dollar terms, it represents a “larger share of their income,” CRFB said.
The 21 percent reduction is predicted to widen to 31 percent by 2098 due to the rising gap between program revenues and benefit payments.
In May, the Social Security Administration (SSA) said it expects the Social Security trust funds to deplete by 2035, a year later than previously projected, following which only 83 percent of the benefits would be payable.
“Congress can and should take action to extend the financial health of the trust fund into the foreseeable future, just as it did in the past on a bipartisan basis,” Martin O’Malley, commissioner of Social Security, said at the time.
Social Security is primarily funded via payroll taxes, with employers and employees each paying 6.2 percent of wages into the program. In 2024, the maximum taxable income for Social Security is $168,600, up from $160,200 last year. Self-employed individuals pay 12.4 percent.
Resolving Funding Issue
Social Security is a key issue in the upcoming elections. Last month, Democratic presidential nominee Vice President Kamala Harris said in an X post that if she were to become president, she would “protect and expand” Social Security.
In February last year, a group of Democrat lawmakers and Sen. Bernie Sanders (I-Vt.) introduced the Social Security Expansion Act to resolve the funding challenges.
The act recommends “requiring the wealthiest American households to pay their fair share of taxes” to extend the solvency of social security by 75 years, according to a fact sheet.
The bill suggests making all income above $250,000 subject to the Social Security payroll tax. It proposes a 12.4 percent tax on the investment and business income of wealthy individuals.
A Heritage Foundation report criticized the Social Security Expansion Act, pointing out that its “enormous tax increases would exacerbate Social Security’s strain on workers and families, making all but the oldest generations worse off.”
During his presidential campaign, former President Donald Trump had asked Republicans not to make any proposal to cut Social Security or Medicare. The Republican Party has adopted this stance as its policy and also dismissed lifting the retirement age.
During a rally in Pennsylvania, Trump said he would cut taxes on Social Security for seniors if reelected.
Roughly 40 percent of Americans who receive Social Security benefits pay taxes on these receipts. Retired individuals making more than $25,000 per year and couples earning more than $32,000 are subject to taxes.
The CRFB has raised concerns over cutting tax on Social Security, saying that such a move would slash federal revenues by roughly $1.8 trillion between fiscal year 2026 and 2035.
“This includes $1.05 trillion less in revenue collection for Social Security and $750 billion less revenue for Medicare,” it said in a post. The revenue reduction “would grow over the long run,” it said.
From The Epoch Times