Social security crisis: Without reforms, benefit cuts of 21 percent are threatened

A new report states: social security Recipients face 21% cuts if a key trust fund, expected to run out in 2033, runs out, and none of the leading candidates in this year's presidential election have presented a plan to stabilize the program.

The bipartisan Committee for a Responsible Federal Budget (CRFB) found in its report that Social Security currently pays more in benefits than it collects in payroll taxes, depleting the reserves of the Old Age and Survivors Insurance (OASI) Trust Fund, which allows the program to pay out full benefits to retirees.

By law, when the trust fund is depleted, Social Security can only pay benefits equal to the amount of payroll tax revenue. The program's trustees expect the trust fund's reserves to be depleted in the fourth quarter of 2033. At that point, today's 58-year-olds will reach the typical retirement age and today's youngest retirees will be 71.

This means that in practice there will be a binding quota of 21%. Reduction in social benefits for retirees beginning in late 2033. According to the CRFB, this would equate to a nominal benefit cut of $16,500 for a typical dual-income couple retiring at the time the trust fund is exhausted, or a cut of $12,400 for a typical single-income couple.

Economist proposes bipartisan plan to avoid financial crisis by stabilizing rising US national debt

The amount of the benefit cut would vary for retirees depending on their age, work history and lifetime earnings. For example, a low-income couple would face a $10,000 benefit cut as defined by the Social Security trustees, while a high-income couple would face a $21,800 cut, the CRFB found.

For comparison, the estimated average Social Security benefit changes monthly, and the average benefit was $1,907 in January 2024. A 21% reduction in this base amount represents a reduction of $400 per month, leaving the benefit amount at $1,507.

WITHOUT REFORMS, THE US NATIONAL DEBT WILL RISE TO RECORD LEVELS, THE PROSPECT OF A DEBT CRISIS INCREASES

Based on the average monthly benefit of $1,907 in January 2024, a 21% cut would result in Social Security recipients receiving $400 less per month. (Kevin Dietsch/Getty Images)

CRFB found that the automatic cut will increase over time from 21% in 2033 to 31% in 2098 as the gap between the benefits Social Security recipients are expected to receive and future Tax revenue.

The report appears while the two leading presidential candidatesDemocratic vice presidential nominee Kamala Harris and Republican candidate and former President Trump have both said they would protect Social Security from benefit cuts, but neither has put forward a plan to reform the program before the trust fund is depleted.

From 2033, Social Security contributions will be cut by $325 per month without any changes: actuary

Former President Trump and Vice President Kamala Harris have said they would protect Social Security, but have not presented any plans to avert the trust fund's insolvency. (Getty Images)

CRFB also noted that Trump’s plan to end the Taxation of social security benefits would result in lower revenue collections and bring forward the insolvency date of the OASI Trust Fund by more than a year to early 2032.

“The fact that both major party candidates for president do not have a meaningful plan to save Social Security from insolvency is a blatant example of fiscal irresponsibility,” CRFB President Maya MacGuineas said in a statement to FOX Business. “In less than a decade, Social Security will face insolvency, and the automatic benefit cuts that will follow will mean the average dual-income couple will have $16,500 less per year than if our country's leaders had taken this problem seriously.”

GET FOX BUSINESS ON THE GO BY CLICKING HERE

“Saying the word ‘protect’ is not enough – neither for today’s seniors nor for those of tomorrow future pensioners deserve to know special what can be done to prevent these cuts,” MacGuineas added.