For many retirees, Social Security benefits are the ticket to a stress-free retirement, especially when they’re combined with outside income sources, like a pension or personal savings. But in the coming years, Social Security faces a serious funding shortfall that could result in massive benefit cuts.
Estimates to what those cuts might entail vary. The Social Security Trustees say benefit cuts might amount to 23%. The Committee for a Responsible Federal Budget says Social Security recipients could be looking at a 24% cut in the near future.
No matter how the exact percentages shake out, reduced Social Security benefits could deal current and future retirees a massive blow.
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Social Security’s funding woes are a major problem
Social Security gets most of its revenue from payroll taxes. But in the coming years, that revenue stream is expected to shrink as baby boomers retire in droves and an inadequate number of replacement workers enter the labor force.
Social Security can use its Old-Age and Survivors Insurance (OASI) Trust Fund to keep up with scheduled benefits until it runs out of money. Last year, the Social Security Trustees projected that the fund’s depletion date would be 2033. But that was before the One Big Beautiful Bill Act (OBBBA) was signed into law.
The OBBBA now includes a $6,000 senior tax deduction that’s expected to let most seniors who receive Social Security off the hook from paying taxes on their benefits. But Social Security also relies on taxed benefits for revenue. So while this change may help seniors in the near term, it hurts Social Security in the long run.
In light of the new senior tax deduction, the Congressional Budget Office expects Social Security’s OASI Trust Fund to run out of money in 2032. Once that fund is out of money, Social Security may have to cut benefits.
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Some seniors could see their retirement income shrink
If Social Security is forced to cut benefits by 23% to 24%, the repercussions could be catastrophic for seniors (current and future) who rely on that income to make ends meet in retirement.
The Committee for a Responsible Federal Budget projects that once Social Security’s trust funds are whittled down in late 2032, assuming a 24% cut, a dual-earning couple retiring at the start of 2033 could face a roughly $18,000 annual reduction in benefits.
To put that in the context of today’s income, the average Social Security retirement benefit as of February 2026 was about $2,076, or just about $25,000 a year. If benefits were to be reduced by 24%, that $25,000 yearly benefit for a typical single retiree today would shrink down to $19,000.
For a couple in 2026 where each partner earns the typical monthly retirement benefit, household income would shrink from roughly $50,000 a year to $38,000 based on a 24% cut. This assumes, of course, that there’s no other income aside from Social Security. But that’s not such a far-off assumption.
A 2024 AARP survey found that 20% of Americans ages 50 and over have no retirement savings. And in 2022, the last year for which there’s data available, the Federal Reserve found that median retirement savings among Americans ages 65 to 74 were only $200,000.
A $200,000 nest egg might only provide $8,000 of annual income under a 4% withdrawal rate, which financial experts have long recommended. So even households with modest retirement savings stand to get battered if Social Security cuts end up happening.
Lawmakers need to take action
The idea of Social Security getting slashed is unquestionably scary. But the silver lining in all of this is that Congress has never allowed Social Security to make cuts to benefits in the past. So there’s a good chance they’ll be able to prevent benefit cuts this time around.
However, the solutions to the problem are murky. Some options for avoiding cuts include increasing the payroll tax rate or increasing full retirement age, which is when Social Security recipients can get their benefits without a reduction. But those changes could have a negative impact on workers’ finances and retirement plans in other ways.
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Bottom line
There’s a strong chance lawmakers will be able to prevent Social Security cuts in the coming years. But it’s important to recognize that if they don’t succeed, your retirement plans could be thrown for a serious loop.
While there’s no need to panic about benefit cuts just yet, it’s important to stay informed about them and come up with a backup plan. That could mean boosting your retirement savings rate or, if you’re close to retirement, relocating to a part of the country where your dollars might go further. The more flexible you’re able to be with your planning, the easier it should be to cope with Social Security cuts if they end up happening.
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