Is your monthly payment being cut?
There is a real risk that the funds sustaining Social Security could be exhausted within the next decade.
One of the primary concerns for Americans is how they will sustain themselves during their senior years. While some have workplace retirement plans and others are saving independently, the reality is that the majority will rely on Social Security. However, there is an ongoing threat that the funds supporting these government programs may run out sooner than anticipated.
A study by the Center on Budget and Policy Priorities found that nearly 16.5 million people aged 65 and older depend on Social Security to stay above the poverty line. Similarly, Gallup discovered that 90% of retirees rely on their pensions to cover a portion of their monthly expenses.
The challenge for future generations of retirees is that the trusts and funds that Social Security depends on are at risk of being depleted within the next ten years. The Social Security Board of Trustees’ annual reports indicate that, within nine years, government retirement programs could face a $23 trillion shortfall.
While this sounds alarming, it doesn’t mean the trusts will go bankrupt. Social Security will still operate, but to continue supporting pensions for decades to come, it would need to implement significant pension cuts starting in 2033.
How much could be cut from my Social Security check?
Various factors, including demographic shifts and fiscal challenges, contribute to the potential depletion of the Old-Age and Survivors Insurance Trust Fund (OASI). This fund currently pays benefits to 51 million retirees and 5.8 million surviving beneficiaries.
If the fund is depleted, the government may need to reduce pensions by up to 21% to keep the Social Security Disability Insurance (SSDI) running until 2098.
In 2024, the average monthly pension for a retired worker is $1,918.28. Experts predict a cost-of-living adjustment (COLA) averaging 2.6% over the next nine years, meaning a retiree in 2033 could receive up to $2,416.79 per month.
However, a 21% reduction would result in a $507.53 cut from each monthly check, leaving the retiree with $1,909.26. This amount would be even less than the 2024 pension.
What can be done?
The issue lies with lawmakers, but the solutions are neither simple nor easy to agree upon. Any changes to Social Security legislation require 60 votes to pass in the Senate, but there is no consensus between the parties.
Democrats propose raising taxes on the wealthy and imposing a labor tax on salaries above $168,000 a year, which are currently exempt. Republicans, on the other hand, suggest delaying the full retirement age, currently set at 67, so workers can contribute to OASI and similar trusts for a longer period.
Neither solution fully addresses the problem, and there is little common ground among lawmakers. While politicians debate, the best course of action is to focus on increasing our retirement savings as much as possible.
