Social Security is on track to cut benefits to retirees in 2033, when its trust fund reserves are forecast to be depleted. The reduction could be substantial, according to a new analysis.
Unless the program is shored up before 2033, the typical newly retired, dual-earner couple will see their Social Security checks reduced by $17,400 annually, or $1,450 per month, according to the report from the nonpartisan Committee for a Responsible Federal Budget.
A newly retired couple with one earner would see a cut of $13,100, the report said. The analysis, which is based on current dollars, doesn’t forecast the impact on newly retired single earners, but the Social Security Administration has estimated that benefits will be cut by 23% in 2033 unless the program is strengthened.
Those cuts could prove devastating to roughly 50 million older Americans who receive Social Security checks, with the Committee for a Responsible Federal Budget forecasting that “senior poverty would rise significantly upon insolvency.” Still, there are plenty of proposals to fix Social Security’s looming funding shortfall, either by raising taxes or increasing the retirement age, or a combination of the two.
The current average monthly benefit check for single earners is about $1,800, according to the Social Security Administration.
“Smash the cap”
Some Democratic lawmakers and left-leaning policy experts say there’s a simple fix: “,” which refers to the Social Security tax cap.
That cap, a feature of the program since its start in the 1930s following the Great Depression, means that any income over that level isn’t subject to the Social Security payroll tax, which is 6.2% for workers and an additional 6.2% for employers. In 2023, the tax cap stands at $160,200, which means any income above that amount is exempt from the payroll tax.
But critics say this places the burden of funding Social Security on low- and middle-income earners, while higher-income Americans get a break. For instance, a middle-income worker earning less than the $160,200 cap in 2023 will pay an effective tax rate that is six times higher than that of a millionaire.
Eliminating the cap would subject higher earnings to payroll tax, generating additional revenue for Social Security and helping to stabilize its finances, proponents say.
Raise the retirement age
Some Republican lawmakers and right-leaning experts are opposed to higher taxes, however, and instead have proposed raising the retirement age.
Last year, some Republican lawmakers floated the idea of lifting the— from its current age of 66 to 67, depending on one’s birth year — citing the “miracle” of longer life expectancies.
Yet critics point out that many people can’t work until they are 70, due to health issues or other reasons. And even if an older worker could remain in the labor force until they were 70, it still would amount to a benefits cut because they would be losing between three to four years of Social Security checks as a result.