Social Security: Without reform, retirees could lose this much in annual benefits, report says

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FILE - Blank Social Security checks are run through a printer at the U.S. Treasury printing facility Feb. 11, 2005, in Philadelphia, Pennsylvania. (Photo by William Thomas Cain/Getty Images)

If a Social Security trust fund is depleted by 2033, the date at which it is currently projected to do so without reform, a typical dual-income couple retiring at that time would lose $16,500 in benefits a year, according to a new report.

The nonpartisan Committee for a Responsible Federal Budget (CRFB) released a report on Thursday, which notes how Social Security is currently paying more in benefits than it receives in payroll taxes – and is depleting the reserves in the Old-Age and Survivors Insurance (OASI) Trust Fund.

The OASI program pays Social Security benefits to retirees, their families, and survivors of deceased workers.

When the trust fund is depleted, Social Security can only pay out benefits equal to what it receives in payroll taxes, by law. The trust fund reserves are projected to be tapped out in the fourth quarter of 2033.

"That is when today’s 58-year-olds reach the normal retirement age and today’s youngest retirees turn 71," the CRFB report noted.

In effect, that means there would be a mandated 21% across-the-board Social Security benefit cut for the program’s 70 million beneficiaries in late 2033.

Assuming current law, the CRFB estimates inaction would lead to a $16,500 benefit cut for a typical dual-income couple who retired at the time of trust fund depletion, or a $12,400 nominal reduction for a typical single-income couple.

The actual size of the benefit cut would vary for American retirees, depending on their age, work history, and lifetime incomes, the report notes.

"For example, a low-income, dual-income couple retiring in 2033 – as defined by the Social Security Trustees – would see a $10,000 cut to their benefits while a high-income, dual-income couple would see a cut of $21,800," the CRFB report states.

"Although the cut for a low-income couple would be smaller and reflect a 21 percent reduction in their benefits, the cut would be a larger share of their income," it adds.

For context, the estimated average Social Security benefit changes monthly, and the average benefit as of January 2024 was $1,907. A 21% reduction to that baseline amounts to a cut of $400 a month, leaving the benefit amount at $1,507.

The CRFB said retirees will experience a 21% across-the-board cut to their benefits in 2033, and that the automatic cut is projected to grow over time to 31% by 2098, citing the widening gap between the program’s benefits and revenues.

How are Social Security cost of living adjustments (COLA) calculated?

The adjustments are based on data relating to inflation.

Meanwhile, the Social Security Disability Insurance (SSDI) trust fund or "disability," which provides monthly payments to people who have a disability that stops or limits their ability to work, is projected to become insolvent by calendar year 2052, according to the Congressional Budget Office.

However, the CRFB has stated that the SSDI trust fund "is in much stronger shape and will remain solvent over the next 75 years."

What Trump, Harris have said about Social Security

The report comes as the two leading presidential candidates, Democratic nominee Vice President Kamala Harris and Republican nominee former President Donald Trump, have each said they will protect Social Security from benefit cuts. However, neither has put forward an official plan to reform the program ahead of the trust fund's depletion.

While Harris hasn’t laid out a plan to address Social Security since becoming the nominee, Democrats have proposed raising Social Security taxes on the wealthiest Americans to cover the gap. Currently, workers pay Social Security taxes on up to $168,000 a year; anything earned above that amount is not subject to Social Security taxes.

Meanwhile, Trump's official platform states he would "fight for and protect social security and Medicare with no cuts, including no changes to the retirement age." But he hasn’t laid out a plan to fix the funding gap.

Trump has pointed to increased oil and gas drilling as a means to pay for Social Security, but according to the nonpartisan CRBP, "current oil and gas leasing revenues to Social Security would cover less than 4 percent of its shortfall." He's also said he would exclude Social Security payments from taxation, which could cost $1.2 trillion over 10 years. The risk, however, is those taxes help fund Social Security.