A new estimate says that starting in 2033, Social Security payments for couples with two incomes could be cut by up to $16,500 per year if Congress does not act quickly.
This should worry retirees. People who are retired will see a big drop in their monthly payments if nothing changes, so it is important to pay attention now.
The Social Security Administration (SSA) wrote to the Senate earlier this year to ask them to do something about the Federal Old Age and Survivors Insurance (OASI) Trust Fund running out of money.
This OASI fund gives Social Security payments to retirees, their families, and the families of workers who have died.
From a recent letter from the Social Security Administration, we know that the OASI Trust Fund’s asset reserves will drop below 20% by the start of the calendar year 2033.
This is based on a set of economic, demographic, and programmatic estimates. Also, we think that the OASI Trust Fund’s funds will run out soon after, in 2033, if nothing is done by lawmakers.
At that point, only about 79% of the Social Security checks that are required by law will be paid.
Retirees might face approximately a 21% reduction in their Social Security payouts.
Because it pays out more than payroll taxes allow, Social Security is about to run out of money. When the depletion date comes up, retirees will see a 21% cut in their Social Security payments, since the government can only pay out what it gets.
This will also have an effect on more than just couples. It is also expected that single-income families will lose $12,400 a year. Also, this cut will hurt seniors and people who get other benefits in general unless laws are changed soon.
The Committee for a Responsible Federal Budget (CRFB) says that seniors with low incomes would be hit the hardest by the $10,000 cut to their Social Security payments.
Even though there are not as many of them as retirees with better incomes, they still bring in more money and may make things worse for people who are already having a hard time.
So far, some experts have said that the Social Security tax rate should be raised from 6.2% to 7.75%.
This would cover at least all payments until 2034. Some people think that raising taxes and cutting benefits together might be the best solution.
Some people have said that the debt should be cut by making older people work longer before they can get Social Security benefits. A lot of guesses and big ideas for possible solutions have been made this year.
But there does not seem to be a convincing answer. Problems are also made more difficult by the political situation.
Former President Donald Trump and Vice President Kamala Harris both said they would protect Social Security, but neither has come up with a full plan for how to fix the program’s expected budget gap.
So, people who are retired or getting close to retirement should think about their options less than ten years before the expected date of depletion.
Talk to a financial advisor to find out if the decrease in your Social Security checks will have a big effect on your funds. Then, make a plan to protect your financial future no matter what happens in the future.
The unknown challenge confronting beneficiaries in the United States
A process called the Cost of Living Adjustment (COLA) is used every year to help people who get Social Security benefits keep their buying power in the face of inflation.
It has been found, though, that seniors have not been getting enough COLAs for a long time. The independent Senior Citizens League says that since 2000, Social Security users’ ability to buy things has dropped by 36%. The way these COLAs are calculated is a big reason for this.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) data from the third quarter is used to figure out Social Security COLAs.
When the CPI-W goes up, benefits go up, but when it doesn’t, benefits stay the same. However, the CPI-W does not take into account how much older workers cost.
As you might expect, the costs of adults of working age and urban workers are different from those of older people who do not have jobs.
