How Much a Middle-Class Social Security Check Will Decrease If Funds Run Out

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

The Social Security Old-Age and Survivors Insurance (OASI) trust fund is projected to be depleted by 2033 (in some estimates, 2032) if no action is taken to intervene. At that point, there would be a 21% across-the-board benefit reduction across the United States.

The amount this would shake out to would depend on your benefit amount, and whether or not you are a single- or dual-income household, but in many cases the reduction would be significant. Here’s a look at how much a middle-class Social Security check is projected to decrease if funds run out.

How Much Would Benefits Drop for Middle-Class Retirees?

According to the most recent report from the nonpartisan Committee for a Responsible Federal Budget, a medium-income dual-income couple retiring at the time of trust fund depletion would have their annual benefits reduced by $16,500. A medium-income single-income couple would have their benefits reduced by $12,400.

Low-income households would also lose thousands in annual benefits. A low-income dual-income couple would see a $10,000 annual benefit cut, while a low-income single-income couple would see a $7,500 cut.

For high-income households, the cuts could be even more drastic. A high-income dual-income couple retiring at the time of trust fund depletion would have their annual benefits reduced by $21,800.

How Likely Is It That Social Security Will Reach Insolvency?

These numbers represent a worst-case scenario — but could it become a reality? According to Marc Goldwein, senior VP and senior policy director at the Committee for a Responsible Federal Budget, that depends on Congress.

“If there’s no action taken by Congress, it’s 100% likely that the trust fund is going to run out,” he said. “Almost definitely that’s going to happen in the next dozen years, and with a pretty high level of certainty, it’s going to happen in the next eight or nine.”

What Can Be Done To Prevent the Fund From Running Out?

There are levers Congress can pull to prevent the Social Security OASI trust fund from running out of money if it so chooses.

“There are three sets of options: You can reduce the amounts that the program is paying out, you can increase the amount coming into the program or you could blow up the entire program,” Goldwein said. “That third option would be really unwise given our massive levels of debt and given the nature of the Social Security program.”

Goldwein believes that most likely, there will be changes to benefits and taxes.

“That could mean making changes to the retirement age or to the benefit formula, or to the income subject to the payroll tax,” he said. “There are tons of options out there. What’s lacking isn’t the options, it’s the political will to make those changes.”

Should Beneficiaries Be Preparing for Cuts?

Goldwein doesn’t think beneficiaries need to panic just yet.

“More likely than not we are going to solve this, and we are going to solve this in a way that current beneficiaries don’t see massive changes,” he said. “Under my base case, current beneficiaries are going to get basically what they’re expecting — maybe they’ll get a little bit less of a COLA, maybe their benefits will be 2% or 4% lower, but in my base case, they’ll be basically getting what they’re expecting.”

However, “there is a chance we go over the cliffs,” he said.

“There is some chance we let that 21% cut happen,” Goldwein said. “I wouldn’t be freaking out and putting all your money under the mattress, but I do think you need to prepare a little bit for the possibility that it’s going to happen.”

For those who are not yet retired, saving a little extra is a wise idea.

“If you are a current worker, I would be saving and planning your retirement decisions assuming your Social Security will be somewhat less than what’s scheduled under the law,” Goldwein said. “You’ve got to make your own choice about what you can afford, but if you can afford to save more for your retirement assuming that Social Security benefits will be 25% lower, that probably would be smart.”

Caitlyn Moorhead contributed to the reporting for this article.

Share This Article: