Social Security is facing a potential reduction in benefits for retirees in 2033 when its trust fund reserves run out. A new analysis from the nonpartisan Committee for a Responsible Federal Budget indicates that the reduction could be significant. If the program is not strengthened by 2033, a typical newly retired couple with dual-earners could see their Social Security checks reduced by $17,400 annually or $1,450 per month. Similarly, a newly retired couple with one earner could face a cut of $13,100. The Social Security Administration has estimated that benefits for newly retired single earners will be reduced by 23% in 2033 unless the program is bolstered.
This potential cut in benefits could have devastating consequences for the approximately 50 million older Americans who rely on Social Security checks. The Committee for a Responsible Federal Budget warns that senior poverty would significantly increase if the program becomes insolvent. However, there are several proposals to address Social Security’s funding shortfall, including raising taxes, increasing the retirement age, or a combination of both.
According to the Social Security Administration, the current average monthly benefit check for single earners is around $1,800. Some Democratic lawmakers and left-leaning policy experts suggest “smashing the cap” as a solution. This refers to the Social Security tax cap, which exempts any income over a certain amount from the payroll tax. Critics argue that this places the burden of funding Social Security on low- and middle-income earners while giving higher-income Americans a tax break. Eliminating the cap would subject higher earnings to the payroll tax, generating more revenue for Social Security and stabilizing its finances.
On the other hand, some Republican lawmakers and right-leaning experts oppose higher taxes and instead propose raising the retirement age. Last year, there were discussions about increasing the retirement age to 70 from its current age of 66 to 67, considering longer life expectancies. However, critics argue that not everyone can work until they are 70 due to health issues or other reasons. Additionally, raising the retirement age would result in a benefits cut as individuals would lose three to four years of Social Security checks.
In order to address the impending funding shortfall, policymakers will need to carefully consider these proposed solutions and their potential impact on retirees and the overall sustainability of the Social Security system.
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