With the trust fund for the Social Security Old-Age and Survivors Insurance close to running out of money, projected cuts to benefits are becoming an increasingly dire prospect for millions of people. High-income couples can expect their Social Security benefits to be cut by more than $21,000 annually starting in 2033-a deep cut that heightens urgency for reform to the system.
Entering into the details of the forthcoming cuts
The Social Security Administration has warned that the OASI trust fund reserves would be depleted by the end of 2033. “At that time, the program would have adequate revenue from payroll taxes alone to pay benefits equal to payroll taxes and thus would involve an automatic 21 percent across-the-board cut for all beneficiaries regardless of income or need.”. This would mean that high-income couples, who until now were securing close to $100,000 in benefits, could see those annual payments shrink to about $79,000. The ramifications of such cuts run deep, especially for those high-income couples who most likely have planned retirements anchored on full benefits. The cut will not only affect financial stability but also the ability to keep up with lifestyles during retirement.
Size of benefit cuts vary by income bracket
The level at which the cuts in benefits are supposed to come on depends largely on income. According to one report published by the Committee for a Responsible Federal Budget, the following cuts would be seen:
- High-income couples: A cut of about $21,000-from $100,000 down to $79,000 per year.
- Middle-income couples: A cut of around $15,900-from $75,700 down to $59,800.
- Low-income couples: about a $10,000 cut, from $45,800 to $36,200
- Cuts for single retirees are deep also: middle-income people lose up to $8,200 every year.
Political dynamics & promises
Up until now, both leading political parties have promised not to touch Social Security despite looming cuts. This promise could very well be an endorsement for the automatic benefit cuts that will take place if reforms are not put into place. Leaders of the political parties have gone under harsh criticism for failing to offer workable solutions to block the cuts which may affect over 70 million beneficiaries.
No candidate for the presidency, including Vice President Kamala Harris and former President Donald Trump, has put forth a comprehensive plan, which has raised serious concerns about the future of Social Security. While both candidates promised to protect the program, neither has provided any concrete strategy regarding looming insolvency. Harris’s proposal for increasing taxes on higher earners could help provide partial relief, but such measures are not likely to materialize without bipartisan support.
Public awareness and the need for reform
Surveys indicate that a large proportion of the American people are uninformed about possible cuts to Social Security benefits. Only 30% of people in a recent poll said they knew that benefits could be cut by 21% in just nine years. It is a general indication that more public education on the issue and urgency for reform needs to take place in order to ensure the system is sustained.
Experts also warn that the longer the nation waits to act, the worse the situation will become. Instead of smaller cuts accompanied by modest increases in taxes to bolster the fund, larger cuts with heftier taxes will be the price paid for delay. For example, if Congress acts today, a 21 percent benefit cut could be prevented. But if reforms are postponed the cuts needed could rise to 25 percent by 2033.
