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Social Security benefits are projected to face a 24% cut by 2032 as the program's trust fund nears depletion, according to a new analysis by the Committee for a Responsible Federal Budget (CRFB). The analysis, based on the latest Social Security Trustees' report, highlights the urgent need for legislative action to address the program's financial shortfall.
The CRFB's findings indicate that the Social Security trust fund's insolvency timeline has been moved up to late 2032, largely due to recent fiscal policies, including the One Big Beautiful Bill Act. This impending depletion would require benefits to be reduced to match incoming revenues, significantly impacting retirees who rely on these funds. For example, a dual-income couple with medium income retiring in 2033 could see an annual benefit reduction of $18,100.
The CRFB warns that without intervention, benefit cuts could exceed 30% by 2099. The depletion of Social Security's trust fund coincides with the projected insolvency of Medicare's hospital insurance trust fund, which faces an 11% cut by 2033. The aging population and declining worker-to-retiree ratio exacerbate these financial challenges.
The Social Security Trustees' report confirms that, under current law, the Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay full benefits until 2033, after which it will only cover 77% of scheduled benefits. The Disability Insurance (DI) Trust Fund, however, is projected to remain solvent through 2099. If the OASI and DI funds were combined, they could pay full benefits until 2034.
Addressing these issues sooner rather than later would allow for more equitable solutions and restore confidence in the program. The CRR suggests that raising payroll taxes by 3.82 percentage points could close the funding gap, but emphasizes the importance of considering a combination of revenue increases and benefit cuts to ensure long-term solvency.