Social Security recipients set to face an $18,000 benefit cut in just seven years
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Retirees are facing the prospect of substantial Social Security cuts in just seven years, sooner than projected, due to the "big, beautiful bill," per an analysis out Thursday from the Committee for a Responsible Federal Budget.
Why it matters: If policymakers don't stop this from happening, it would at least double the poverty rate of America's seniors, per several estimates.
By the numbers: The new analysis projects a 24% cut to benefits by late 2032. That's equal to an $18,000 annual benefit cut for a dual-earning couple who both retire in 2033.
- They also might experience reduced healthcare access, per the analysis, due to an 11% cut in Medicare hospital payments.
- The percentages would grow over time, as the population ages and fewer young Americans are paying into the system.
How it works: The trust fund is effectively the money the federal government takes in from Social Security taxes. For decades, the system took in more in taxes than it paid out, the Treasury department then invested the surplus.
- In 2021, it started tapping reserves to keep paying benefits.
- Once the reserves are depleted, benefits would be "pay-as-you-go," paying out money as taxes come in.
- That the trust fund would be depleted in the 2030s has long been known.
Zoom in: The tax cuts in the big bill and the increase in the deduction for seniors, specifically, would reduce Social Security's incoming tax revenue — and speed up depletion by about a year, per the CRFB.
The big picture: Social Security is arguably the most popular government benefit — most Americans either receive benefits or know someone who does — the vast majority of Americans believe in its importance, according to recent polling.
The bottom line: Most policy wonks and Social Security advocates believe that it's highly unlikely that Congress would sit back and watch benefits get cut like this.
- However, there's little incentive to act ahead of time — the last time the trust fund headed to a shortfall in the 1980s, Congress didn't act until the last minute when it raised the retirement age and started taxing benefits.
