Social Security’s imminent budget shortfall may not be a certainty.
A new proposal from a nonpartisan think tank, the Committee for a Responsible Federal Budget, would cap yearly Social Security payments at $50,000 for singles and $100,000 for married couples.
The change would fund 20 percent of the funding gap the Social Security system faces, and would cover 60 percent of that gap over 75 years. Overall, it would save as much as $190 billion over its first 10 years, the proposal said.
The change would impact around 1 million retirees getting Social Security benefits.
In February, the Congressional Budget Office, which analyzes and estimates the spending needed for legislation and policies, released a report saying the Old Age and Survivors Trust Fund, a key Social Security funding source, would run out by 2032.
Social Security payments could be cut by as much as 30 percent because of it, nonpartisan policy research firm The Urban Institute wrote in February.
Several factors have contributed to the projected shortage. Income hasn’t risen as fast as experts thought it would.
Lower pay means lower Social Security contributions from paychecks, which means a smaller pool of funds for paying out retirement benefits, the nonpartisan think tank Roosevelt Institute observed in January.
There are fewer workers paying into the system, too. There were five workers for every one retiree when Social Security started.
“Today that number is more like 2 or 3,” Nick St. George, owner of St. George Wealth Management, told The Independent in an email. “Fewer workers means fewer contributors to the system to support each beneficiary.”
If the Committee for a Responsible Federal Budget’s proposal becomes law, it would be the first major step toward a shortfall fix this year.
It couldn’t come at a better time for retirees. Losing nearly a third of a Social Security benefit would significantly change the average person’s retirement strategy.
A 30 percent cut would be around $621 per month based on the average 2026 payment of $2,071, per the Social Security Administration.
Scrambling to make up for that lost income would be another burden on a generation of future retirees already deeply concerned about their ability to retire comfortably.
The average American retiree believes they need $823,800 saved to retire comfortably, but have less than $290,000 saved, according to a January survey from Clever Real Estate.
Future retirees concerned about receiving less Social Security than they planned for should try to pay down their high-interest debt before retirement arrives, St. George said.
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