A recent report from the Committee for a Responsible Federal Budget (CRFB) has raised concerns about the future of Social Security. The report suggests that, unless a new funding solution is identified, retirees could face significant reductions in their benefits in the coming years. According to the analysis, these potential cuts may begin to affect beneficiaries as early as 2033.
Newsweek, referencing the CRFB’s findings, underscored the need for timely action to address these challenges, which could have a lasting impact on the financial security of millions of Americans reliant on Social Security for retirement income.
Projected Cuts to Social Security Benefits
The CRFB’s analysis suggests that a couple with medium dual incomes, retiring in 2033, could lose up to $18,100 annually in Social Security benefits if the current funding issue is not addressed. For a single-income couple, the reduction would be approximately $13,600 per year. These cuts would occur due to the impending insolvency of the program’s trust funds.
Social Security’s Reliance on Payroll Taxes and Trust Funds
Social Security is largely funded through payroll taxes and reserves from government trust funds. The latest Social Security Trustees report has projected that the program’s trust funds—specifically, the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) funds—will run out by 2034.
Once this happens, benefits will be solely reliant on payroll taxes, leading to an automatic reduction of approximately 21 percent in benefits.
Factors Affecting Future Benefit Cuts
The actual size of the benefit cuts may vary, depending on factors such as age, marital status, and employment history. For instance, dual-earner couples with lower incomes would face a smaller cut of about $11,000 per year, while high-income couples could see reductions of nearly $24,000 annually.
The impact will be felt more acutely by low-income couples, relative to their overall income and lifetime earnings.
The Impact of Recent Legislative Changes
The recent One Big Beautiful Bill Act (OBBBA) has already changed the outlook for Social Security’s funding. While the Social Security Trustees’ report projected a 21 percent cut, the CRFB’s calculations reflect a slightly higher reduction of 24 percent due to the passage of the OBBBA.
This bill includes tax rate cuts and an expanded senior standard deduction, reducing the revenue generated by the taxation of Social Security benefits.
The tax rate cuts and increase in the senior standard deduction from the recently enacted OBBBA would reduce Social Security‘s revenue from the income taxation of benefits, increasing the required cut by about a percentage point upon insolvency – the CRFB said in its report.
If the expanded senior standard deduction and other temporary measures of OBBBA are made permanent, the benefit cut would grow larger.
Past Efforts to Address Social Security Funding Issues
The United States has faced similar financial challenges with Social Security before. In the 1980s, when the program was nearing insolvency, Congress implemented a series of reforms, such as increasing payroll taxes, raising the full retirement age, and introducing taxes on a portion of benefits.
What Policymakers Are Saying
The Committee for a Responsible Federal Budget said in its report:
Policymakers pledging not to touch Social Security are implicitly endorsing these deep benefit cuts for 62 million retirees in 2032 and beyond. It is time for policymakers to tell the truth about the program’s finances and to pursue trust fund solutions to head off insolvency and improve the program for current and future generations.
Social Security Commissioner Frank Bisignano also commented on the matter earlier this month, saying:
This is a historic step forward for America’s seniors. For nearly 90 years, Social Security has been a cornerstone of economic security for older Americans. By significantly reducing the tax burden on benefits, this legislation reaffirms President Trump’s promise to protect Social Security and helps ensure that seniors can better enjoy the retirement they’ve earned.
Current Proposals to Stabilize Social Security
Several proposals are being put forward to prevent insolvency. Notably, the Medicare & Social Security Fair Share Act, reintroduced by Senator Sheldon Whitehouse and Representative Brendan Boyle, would impose payroll taxes on wages and investment income exceeding $400,000.
Another proposal comes from Senator Bill Cassidy and Senator Tim Kaine, who have suggested creating a $1.5 trillion investment fund to help stabilize Social Security over the long term.
