The latest Social Security Trustees Report shows that the program could face a benefit cut as early as 2034, only paying roughly 81% of scheduled benefits if Congress takes no action. But another estimate from the Committee for a Responsible Federal Budget (CRFB) shows something even more dire.
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According to the analysis, a dual-earning couple retiring could see an $18,100 reduction — about 24% — at the start of 2033. The CRFB also pointed out that these cuts would grow over time, and by 2099, the size of the benefit cut could be well over 30%.
Here’s why it’s estimated to happen and what action, if any, can be taken to stop this from happening within the next decade.
CRFB and Social Security Projections
The CRFB’s estimated benefit reduction is expected to come after the Social Security’s Old-Age and Survivors Insurance (OASI) Trust Fund runs out in 2032. The OASI is a trust fund that holds money collected from payroll taxes to help fund the Social Security program.
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The CRFB also pointed out that the enactment of the Big Beautiful Bill is also to blame. The law states that when the trust funds use up their reserves, payments are limited to incoming revenues.
According to CRFB, the tax rate cuts and the increase in the senior standard deduction from the BBB would reduce Social Security’s revenue. If the measures are made permanent, the benefit cut would grow larger.
Should Retirees Worry?
Should retirees worry now that a larger reduction in Social Security benefits could happen sooner rather than later? More than likely, Congress will step up and take action to prevent this from happening.
There are numerous strategies Congress could implement, but most involve either reducing Social Security benefits, increasing the payroll tax or income limit, increasing the age at which taxpayers can claim benefits or a combination of strategies.
The last time this happened was in 1983, when Congress increased the full retirement age from 65 to 67 and implemented an income tax on Social Security benefits.
However, experts advise preparing as if your benefit will be reduced, such as contributing to retirement plans and saving what you can.
The Bipartisan Policy Center recommends delaying claiming Social Security for a higher monthly benefit and using a “bridge strategy,” in which a household draws down retirement savings to prevent claiming Social Security benefits earlier than necessary.
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This article originally appeared on GOBankingRates.com: Here’s How You May Lose $18,100 in Social Security in 2033 and What To Do About It
