More retirees rely on Social Security: AARP
As the Social Security system turns 90 years old, 65% of retirees rely on it. Surveys show that public confidence in its future continues to decline.
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The average working couple who plans to retire within six years can expect to receive $16,900 a year in Social Security benefits if Congress continues to do nothing to shore up the funds used to pay beneficiaries, according to the Bipartisan Nonprofit Committee for a Responsible Federal Budget think tank.
The trust fund, which supplements the payroll taxes that come in to pay monthly Social Security benefits, is expected to be depleted by the end of 2032, the program’s trustees said. In that case, the law requires an estimated 22% reduction in benefits to ensure that program costs do not exceed income.
That’s when today’s 61-year-old reaches normal retirement age, and when today’s youngest retiree turns 68.
“Social Security’s failure is no longer a crisis for future lawmakers to address,” the CRFB report said. “Senators elected this year will take office at a time when Social Security retirement benefits are depleted.”
Is a 22% Social Security cut the worst that could happen?
Analysts said the longer Congress stands idle, the worse the situation for Social Security recipients will become.
“These cuts are expected to widen over time due to the widening gap between social security payments and dedicated revenues,” the CRFB said. “By the end of this century, annual benefit reductions are expected to reach 35%.”
Social Security benefits decrease as Medicare implements cuts
To make matters worse, cuts to Social Security benefits would also occur at about the same time that Medicare would have to implement its own cuts.
Funds that finance Medicare Part A, which pays for services such as inpatient hospitalization, skilled nursing and other post-acute care services, and hospice care for Medicare beneficiaries, are expected to run out around mid-2033. At that point, the fund would be able to reimburse providers for only 89 cents for every dollar of Part A services provided.
That means an 11% spending cut or a significant tax increase would be needed to make up the shortfall, Sianna Correa and Erica Socker wrote in a blog last month for the Georgetown University Medicare Policy Initiative.
But cuts to Medicare Part A are only part of the Medicare problem, they said. “Perhaps an even more important part of this story has to do with spending in the rest of the Medicare program,” the researchers wrote. Medicare also includes Part B, which covers outpatient visits, doctor visits, preventive services, and medical supplies, and Part D, which covers drug coverage.
Parts B and D are not at risk of bankruptcy because they are funded by a combination of Medicare beneficiary premiums and federal general funds, primarily corporate and personal income taxes. As the cost of providing services covered by Parts B and D increases, so do the premiums paid by beneficiaries and the tax revenues needed to fund the Medicare program.
Standard monthly Part B premiums in 2026 will rise about 10% to $202.90, exceeding $200 a month for the first time, and are projected to increase by an average of 6.6% over the next 10 years, program directors said. Part D premiums will increase at an even faster pace.
“As the cost of Part B and Part D benefits increases over time, a larger percentage of a beneficiary’s Social Security benefits will likely go toward paying these higher out-of-pocket costs,” Correa and Socker wrote. “The combined average premiums and cost-sharing that beneficiaries pay for Parts B and D will be about one-quarter of the average Social Security benefit in 2026. By 2050, premiums and cost-sharing will increase to more than one-third of the average benefit.”
What can Congress do for Social Security?
A bipartisan group of senators introduced legislation this week to fast-track the Social Security Savings Act. The bipartisan, seven-member Social Security Advisory Commission will draft a bill to keep the program’s trust fund solvent for at least the next half century, which will be submitted by congressional leaders to the House and Senate before being considered by committees that could hold public hearings and revise the bill.
The bill would need 60 votes in the Senate and a majority in the House to become law.
Analysts praised the bill, but while there is no shortage of ideas, the board still needs to come up with a plan. Over the years, analysts have proposed many ideas, but none have gained traction.
Ideas range from raising payroll taxes to help fund Social Security to raising the full retirement age. This year, the CRFB proposed a $100,000 cap on total annual Social Security benefits for couples who reach full retirement age, and a $50,000 cap starting this year for single retirees. Former Social Security Administration Secretary Martin O’Malley said lawmakers should raise the cap on income subject to Social Security payroll taxes instead of pursuing benefit cuts.
Here’s what USA TODAY readers have to say:
- Air Force veteran David Varley, 78, echoes O’Malley’s thoughts. “For me, the least painful approach would be to remove income limits completely and pay wealthy people year-round,” he said. “I looked at the payroll statistics for 2024. There are 134.8 million taxpayers, and 16% of them have incomes of $200,000 or more. That’s 21.6 million taxpayers. These people will reach the cap. “They probably won’t miss this tax increase because they’ve been paying taxes for most of the year,” Burley said, conservatively calculating that the measure could add $41.5 billion to the fund.
- Joseph Jason Jr., 70, a retired mid-level executive at a Fortune 500 company, proposes allowing Americans to opt for a one-time, tax-free Roth conversion that would waive their right to Social Security benefits for the rest of their lives. “Those of us who are lucky enough to participate in this will avoid at least $1 million in Social Security payments over our lifetimes,” he said. He acknowledged that the government would lose tax revenue, but said he felt the benefits of keeping Social Security affordable for those who need it outweighed the tax revenue.
No matter how many ideas are presented, it is up to Congress to choose one and act on it. But “we believe our elected officials will avoid any changes that could affect voting,” Jason said.
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday..
