In a bid to tackle the impending insolvency of Social Security, the Committee for a Responsible Federal Budget has put forward a proposal to limit the Cost-of-Living Adjustments (COLAs) for those receiving the largest benefits.
The Social Security retirement trust fund is on track to be exhausted in seven years, with the combined trust funds running out in nine years, according to a report released by the committee on Tuesday.
Up To 24% Cut In Benefits
Without any corrective measures, retirees could see a 24% cut in benefits by late 2032. The proposed COLA cap is designed to slow benefit growth and enhance solvency.
Currently, Social Security benefits rise annually through COLAs based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The new proposal suggests capping these adjustments at the level received by high earners.
Cap Could Result In Substantial Savings
The report indicates that implementing a COLA cap could yield substantial savings and reduce Social Security’s funding gap. For example, a cap set at the 75th percentile of benefits could save $115 billion over a decade and close one-tenth of the 75-year solvency gap.
This cap would primarily impact beneficiaries with the highest lifetime incomes, while most beneficiaries would continue to receive full inflation protection. The proposal is part of a broader initiative to ensure Social Security’s sustainability without discouraging seniors from working or saving.
Social Security Checks Expected To Increase By 2.8%
The potential COLA cap comes at a time when Social Security checks are expected to increase by 2.8% in 2026, according to analysts. However, this rise may not be sufficient to counteract the growing inflation, especially for seniors living on fixed incomes.
Moreover, amidst the current government shutdown that began on October 1, Social Security checks continue to be distributed, as they are considered mandatory spending and not reliant on Congress passing a new budget each year. This makes them one of the few federal programs insulated from political gridlock.
Read Next:
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Shutterstock
