Newly retired couples may see their 'golden years' seriously tarnished if Congress continues to do nothing to shore up the funds used to pay Social Security beneficiaries, research reports show.
Average dual-income couples planning to retire in six years should expect to receive $16,900 less in annual Social Security benefits if Congress continues to do nothing to strengthen the funds used to pay beneficiaries, according to the nonpartisan, nonprofit Committee for a Responsible Federal Budget (CRFB) think tank.
That can add up to hundreds of thousands of dollars over their lifetime, an analysis by health care cost-projection software firm HealthView Services said.
The trust fund that supplements incoming payroll taxes to pay monthly Social Security
benefits is expected to run dry by the end of 2032, according to the program's trustees. When that happens, the law requires benefits to be reduced by an estimated 22% to ensure the program’s costs do not exceed its revenues.
That's when today's 61-year-olds will reach their normal retirement age and when today's youngest retirees will turn 68.
"Social Security’s insolvency is no longer a crisis for future lawmakers to deal with," CRFB's report said. "Senators elected this year will be in office when Social Security’s retirement fund is exhausted."
Social Security losses will only mount
Those losses will only get larger the longer Congress sits on its hands, analysts said.
"These cuts are projected to grow over time due to the rising gap between Social Security’s costs and dedicated revenues," CRFB said. "At the end of the century, annual benefit cuts are expected to reach 35%."
Using a 17% decline in Social Security payments, a couple who becomes first eligible for benefits in 2034 will see their average monthly Social Security benefit lose between $161,000 to $194,000 in lifetime benefits, HealthView Services estimated. For a couple receiving maximum Social Security benefits, the reduction is between $425,000 and $509,000, it said. Data are based on couples living to average longevity based on Social Security's actuarial tables of 81 for males and 84 for females.
"Whether or not changes are made to the program, Americans will be negatively impacted financially," said Ron Mastrogiovanni, HealthView Services chief executive.
Lower Social Security income to come as health care costs rise
Even worse, lower Social Security benefits will come around the same time Medicare will have to implement cuts of its own and further squeeze retirees.
The fund that helps fund Medicare Part A, which pays for services such as inpatient hospital stays, skilled nursing and other post-acute care services, and hospice care for Medicare beneficiaries, is expected to be depleted around the middle of 2033. At that point, the fund will be able to reimburse providers only 89 cents for every dollar of Part A services provided.
That means an 11% cut in spending or substantial tax increases will be needed to cover the shortfall, said Ciannah Correa and Erica Socker in a blog last month for Georgetown University's Medicare Policy Initiative.
But Medicare Part A cuts are only part of Medicare's issues, they said. "Perhaps an even more important part of the story relates to spending in the rest of the Medicare program," the researchers wrote. Medicare also encompasses Part B for outpatient care, doctor visits, preventive services and medical supplies, and Part D drug coverage.
Part B and Part D aren't in danger of insolvency because they're financed through a combination of Medicare beneficiary premiums and federal general revenue, primarily corporate and personal income taxes. As the cost of providing the services covered by Parts B and D grows, so do premiums beneficiaries pay and tax revenues needed to fund the Medicare program.
In 2026, the standard monthly Part B premium jumped by almost 10% to $202.90, exceeding $200 a month for the first time. Premiums are forecast to increase by 6.6% on average over the next 10 years, the program's trustees said. Part D premiums will grow at an even faster pace.
"As the cost of Part B and D benefits increases over time, a greater share of beneficiaries’ Social Security benefits will likely go to paying these higher out-of-pocket costs," Correa and Socker said. "The combined average premiums and cost-sharing that beneficiaries pay for Parts B and D are about one-quarter of the average Social Security benefit in 2026. By 2050, premiums and cost-sharing will increase to more than one-third of the average benefit."
Can Congress save Social Security?
A bipartisan group of senators introduced legislation this week to fast-track any Social Security-saving bills. A bipartisan, seven-member Social Security Advisory Board would draft a bill to keep the program's trust funds solvent for at least the next half-century, and be introduced in the House and Senate by congressional leaders before being considered by committees, which could hold hearings and revise the legislation.
To become law, the bill would still need 60 votes in the Senate and a majority vote in the House.
Some analysts applauded the bill. The Bipartisan Policy Center endorsed the proposed legislation as a "serious bipartisan process to break the status quo of inaction," while the Committee for a Responsible Federal Budget said it hoped the proposal "jumpstarts a much-needed process to secure Social Security."
However, AARP said it "strongly" opposes it. The nonprofit, nonpartisan advocate for 125 million Americans ages 50 and older agreed that Congress urgently needs to address Social Security’s finances but saw no reason for lawmakers to farm out that work to another body.
For years, analysts have floated many ideas, but none have gained traction.
Ideas range from boosting the payroll tax that helps fund Social Security to raising the full retirement age. CRFB this year proposed a $100,000 ceiling on the total annual Social Security benefit for a couple at full retirement age and a $50,000 limit for a single retiree starting this year. Former Social Security Administration Commissioner Martin O’Malley said lawmakers should raise the cap on earnings subject to Social Security payroll taxes rather than pursue benefit reductions.
Retirees have ideas, too
Policy experts don't have a lock on ideas. USA TODAY readers who are themselves retirees have chimed in with their suggestions:
- Air Force veteran David Varley, 78, is in line with O'Malley's idea. "What seems to me to be the least painful approach would be to eliminate the income cap altogether, having the rich pay in all year," he said. "I took a look at 2024 payroll figures. There were 134.8 million taxpayers, of which 16% earned over $200,000. This is 21.6 million taxpayers. These are the people who would probably not miss this increase to their taxes since they have been paying the tax most of the year until they hit the cap." Varley said he conservatively calculated the move could add $41.5 billion to the fund.
- Retired midlevel Fortune 500 manager Joseph Jason Jr., 70, suggests allowing Americans to choose a one-time tax-free Roth conversion that would waive their rights to any Social Security benefits for the rest of their lives. "Those of us who are fortunate to partake in this would result in at least $1 million of payment avoidance from the Social Security fund over a lifetime," he said. He acknowledges that the government would lose tax revenue, but he said he felt the benefits of keeping Social Security solvent for those who need it outweighed the tax loss.
No matter how many ideas are floated, it's up to Congress to choose one and act, analysts say. But "I believe our elected officials will shy away from any changes that will potentially impact votes," Jason said.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
This article originally appeared on USA TODAY: How Congress' inaction on Social Security could tarnish your retirement
