A Big Social Security Cut Is Looming, but Here’s Why an Expert Says You Shouldn’t Panic
Written by
Gabrielle Olya
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Molly Sullivan
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Warnings about looming Social Security reductions have many retirees on edge — and for good reason. According to the Committee for a Responsible Federal Budget, the Social Security trust fund is projected to exhaust its reserves in late 2032, triggering an estimated 24% across-the-board benefit cut for all recipients. For a dual-earning couple retiring in early 2033, that could mean a loss of about $18,100 per year.
But while the numbers sound alarming, retirement expert Chris Orestis, president of Retirement Genius, said the situation deserves attention, not panic — here’s why.
What a 20% Social Security Cut Would Mean for Retirees
Orestis is clear: A Social Security benefit reduction of more than 20% would be significant.
“The impact of erasing that amount of income for over 70 million people would not only be devastating for people and families who rely on this income, but it would also have a disastrous impact on the overall economy, as all that spending power would instantly evaporate,” he said.
The situation becomes more concerning when you consider that the Medicare trust fund is on a similar path toward insolvency. If both funds face reductions, retirees could see higher Medicare premiums deducted from their remaining Social Security benefits — shrinking their monthly incomes even further.
How Much Income Is Really at Risk
On an individual level, Orestis noted that a 20% cut equals roughly $5,500 per beneficiary per year.At a national level, the effect is even more dramatic.
“This would wipe out over $300 million of consumer spending from the country overnight, which would have massive ripple effects across the entire economy,” he said.
Why Social Security Is Facing a Shortfall
The root cause of the Social Security shortfall is the demographic shift happening in the U.S. — not enough workers are paying into the system to support the growing number of beneficiaries.
“It takes at least three workers to help sustain one person collecting Social Security,” Orestis said. “The problem is that the aging population keeps growing and living longer, while the number of available workers paying into the system is not keeping up.”
Many Americans assume their Social Security contributions are stored in a personal account for later use, but that’s not how the system works. Current workers fund current retirees, and the balance depends heavily on the worker-to-beneficiary ratio.
This imbalance is intensifying as the last baby boomers turn 65 by 2030 and the first Gen Xers become eligible for benefits in just two years.
“That will be a lot of pressure on the system at a time when its financial stability is already being challenged by demographic, economic and political upheavals,” Orestis said.
What Could Prevent Benefit Cuts
Several proposals have been floated to improve solvency, including:
- Raising the full retirement age
- Increasing taxes on high earners
- Privatizing elements of the system
- Adjusting eligibility for future generations
Orestis believes the most effective immediate fix would be higher payroll taxes for top earners, who contribute proportionally less of their income than middle-class workers.
“In the longer run, increasing the retirement age would also make sense, but targeted at a point in the future that would impact people not yet in the program,” Orestis said.
He noted that this would likely apply to millennials and Gen Z, who are decades away from retirement.
Why Older Americans Shouldn’t Panic
Despite the serious projections, Orestis cautioned that current retirees and near-retirees should not make drastic financial decisions based on alarming headlines.
“The short-term prospect for Social Security benefits is that unexpected draconian cuts to entitlement programs, changes to benefits, retirement age or other eligibility requirements are not possible for people currently on the program — or within a five to 10 year window,” he said.
He also noted that while 2033 may not feel far away, in political terms it is “an eternity,” leaving substantial time for reforms.
“Changes to Social Security will most likely be discussed a great deal, but the program will continue to operate at current benefit levels with an initial eligibility age of 62, full retirement age of 67 and age 70 to reach the maximum payout for monthly benefits for the foreseeable future,” Orestis said.
Younger Americans May Want To Plan For Uncertainty
While current retirees and near-retirees shouldn’t worry too much about cuts to their Social Security benefits, younger Americans may not be as lucky.
“The longer-term prospects for millennials and Gen Z are more complicated,” Orestis said. “The program will not disappear within 10 years, and planning for retirement as if it could be gone is an unnecessary exercise. But there is a real need for changes to these programs to address the looming solvency crisis they will face within a decade or less.”
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