Social security reform may first target high-income earners
Social Security costs reach $1.5 trillion annually, and demographic changes threaten the program’s survival.
News told by money
Social Security recipients will lose an average of $500 a month in benefits if the program’s trust funds are depleted within seven years, as predicted, according to a new analysis.
For the past 16 years, the cost of Social Security’s retirement program has exceeded the amount it receives from payroll taxes, forcing it to draw down its trust fund reserves to make up the shortfall. If nothing changes, the retirement trust fund will be depleted in 2032, according to the Social Security Administration Board.
At that point, everyone’s benefits could fall by 24%, the Committee for a Responsible Budget estimates. Nationally, this equates to an average loss of $500 a month, more than the average retired household spends on groceries each month, the report said. According to the 2024 Consumer Expenditure Survey, households with people 65 and older spent an average of $5,251 on home food in 2024, or $438 per month. Adjusted for inflation, this figure would be worth $461 in 2026, according to the CRFB.
“No state is immune from the potentially devastating impact of bankruptcy,” the CRFB warned in its report.
How many people will be affected?
Nearly 70 million Americans, or about 1 in 5 people, receive Social Security benefits. This includes retirees, surviving spouses, and dependents.
The CFRB estimates that between 10% and 23% of each state’s population will be affected.
Which states will be the largest?
Beneficiaries in 29 states will see an even steeper reduction than the average $500, according to the CRFB.
According to that, the top 10 losers are as follows:
- Connecticut $556
- New Jersey $554
- New Hampshire $553
- Delaware $549
- Maryland $541
- Washington $531
- Minnesota $530
- Massachusetts $527
- Michigan $523
- Utah $523
Which states will affect the most people?
According to the CRFB, 10 to 23 percent of each state’s population will be affected by Social Security benefits cuts.
The states with the highest percentage of residents facing benefit cuts are:
- Maine 22.9%
- West Virginia 22.4%
- Vermont 22.0%
- Delaware 21.1%
- Montana 21.0%
- New Hampshire 21.0%
- South Carolina 20.6%
- Wisconsin 20.2%
- Michigan 19.8%
- Pennsylvania 19.8%
How might the state’s economy be affected?
If Social Security benefits were cut by the current 24%, the CFRB estimates it would amount to $345 billion this year, or 1.1% of gross domestic product (GDP).
According to the CFRB, the impact on individual states ranged from 0.2% to 1.9% of GDP, with 40 states experiencing cuts of more than 1% of GDP. States with aging populations and low per capita incomes will be hardest hit, the report said.
The top 10 most affected states are:
- West Virginia 1.9%
- Mississippi 1.8%
- Vermont 1.8%
- South Carolina 1.7%
- Maine 1.7%
- Michigan 1.6%
- Montana 1.6%
- Arkansas 1.6%
- Alabama 1.6%
- Idaho 1.5%
“With less than seven years until Social Security is projected to fail, policymakers need to enact program changes as soon as possible to protect against this scenario,” the CFRB 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..
