Social Security recipients are the receiving end of bad news on top of bad news.
Last week, the non-partisan Congressional Budget Office forecasted the Social Security trust fund is set to run out a year earlier than previously estimated – in 2032 vs. 2033. If Congress fails to act before that date, there could be a 24% benefit cut for all beneficiaries. That cut would be mean a Social Security beneficiary who gets $2,000 a month would see their benefits drop by $480 to $1,520.
The decline in the largest fund used to pay Social Security benefits, the Old-Age and Survivors Insurance Trust Fund, would be exhausted, in part, due to a decline in the number of younger workers paying into the system, SeekingAlpha reported. If the funds are depleted, Social Security would be forced to pay benefits only out of current income from payroll taxes, which is less than the annual cost paid to retirees.
The ticking clock on Social Security isn’t the only issue facing retirees.
The latest forecast from TSCL showed 2026’s Cost of Living Adjustment is estimated to be 2.8% – the same as last year but a far cry from the 8.7% COLA issued in 2023 amid pandemic-related inflation.
“Years of lackluster COLAs and a looming Social Security insolvency crisis, with its 24 percent automatic benefits cuts, puts a double squeeze on seniors,” TSCL Executive Director Shannon Benton said in a statement. “Older Americans already feel like their benefits don’t keep up with inflation, so this risks putting them further and further behind, pushing many into poverty.”
COLA is determined by the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, for the third quarter of the year – July, August and September. That figure is compiled and then compared to the CPI-W for the same period the previous year. The year-over-year difference is the new COLA payable in the coming year.
Solutions to the COLA and Social Security’s insolvency are on the table, Benton said.
“Most of them are common sense, and many are popular among seniors. For example, 77% of seniors support eliminating the $184,500 cap on income subject to Social Security taxation, with both Republicans and Democrats broadly in favor,” she said. “According to the Social Security Administration’s Chief Actuary, this would extend Social Security’s solvency by 68 years, through 2090.”
According to TSCL’s research, 58 percent of seniors fear that fast-rising inflation will drive up their spending and force them to deplete their retirement savings early. More than four in five Americans over the age of 65 see the looming Social Security insolvency as a very or extremely concerning issue. If automatic benefits cuts occurred, 73 percent say they would struggle to pay monthly bills, 68 percent would cut back on food or groceries, and 52 percent would skip or delay medical care or prescriptions, TSCL said.
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