How much could your Social Security benefits be cut if its trust fund becomes insolvent?
Congress must take action in order to shore up Social Security or beneficiaries will see their monthly payments cut within a decade. Here’s a look.
The Board of Trustees for the Social Security Old-Age and Survivors Insurance (OASI) trust fund have projected that it be depleted within a decade if action isn’t taken to shore it up. Both presidential candidates have said that they will protect the program, which 4 in 10 retired Americans rely on as their sole source of income, but they haven’t yet offered detailed plans.
While the program will still be able to make monthly payments to retirees well into the future, the amount beneficiaries receive would be cut once the trust fund becomes insolvent. Furthermore, the longer Congress waits, the worse the outlook would be for the program and less palatable the fixes.
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How much could your Social Security benefits be cut if its trust fund becomes insolvent?
Once the OASI trust fund is depleted, law requires that spending be cut to match revenue. That would mean an across-the-board benefit reduction of 21% for the 70 million beneficiaries. A recent analysis from the Committee for a Responsible Federal Budget estimates that would represent a $16,500 cut in annual benefits for a typical dual-income couple retiring at the time the trust fund is tapped dry, forecast to happen in 2033.
Additionally, the reduction would grow over time as the gap between benefits and revenues widens to the point that in 2098 retirees that year would receive 31% less.
However, experts feel that “it’s literally inconceivable that Congress wouldn’t act” to shore up the program. “Every single member of Congress would be voted out — people would be so furious,” said Nancy Altman, president of Social Security Works, speaking to CBS news.
Changes Congress will have to make to stabilize Social Security
There are plans afoot in Washington about how to fix the Social Security program which contemplate cutting benefits, raising taxes or increasing the retirement age when you can claim full benefits as well as a combination of those ideas.
However, Chris Towner, policy director at the Committee for a Responsible Federal Budget warns that the longer lawmakers dawdle fixing the program, the more it would be destabilized.
“It could be fixed right now with a 27% tax increase or a 21% benefit cut to all beneficiaries, while waiting would make the tax increase grow to 32% and the cut to 25%,” he told CBS News.