The Social Security Trustees have once again sounded the alarm on the future of America’s critical retirement benefits program. In a June report, the Trustees warned that the Old-Age and Survivors Insurance (OASI) Trust Fund is expected to be depleted in 2032.
That’s the trust fund used to help pay retirement benefits. It’s now going to run out one full quarter sooner than last year’s projections. If that happens, a 22% benefit cut would occur automatically.
The cut would come because Social Security can only pay benefits from collected revenue if the trust fund is depleted, and there’s only enough revenue to cover 78% of promised benefits.
This isn’t a hypothetical scenario. It’s going to become reality without a legislative fix. And, if that happens, it will cost retirees a shocking amount of money over 20 years. If you’re making your retirement plan, here’s what you need to know about the amount you stand to lose.
Here’s how much the average retiree could lose
So just how much would the typical senior see their benefits decline if the automatic cut happens? The numbers aren’t good.
In 2026, the average Social Security benefit is $2,071 per month. A 22% reduction in this benefit would leave retirees with just $1,615.38 per month. Since almost ⅔ of seniors are already dissatisfied with how much they receive from Social Security, losing $455.62 is a huge hit.
When we look at this loss over the entirety of retirement, the numbers are even more dire. Missing out on $455.62 per month in income over a 20-year retirement would mean seniors fail to collect $109,348 they should have.
While cost-of-living adjustments would change the math slightly and potentially lead to even bigger losses since future COLAs will be applied on a smaller benefit, even this $109K number should disturb every retiree who needed that income to cover the bills.
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Your potential losses depend on your benefit
While the average retiree stands to lose as much as $109,348 over 20 years thanks to benefit cuts, your own specific benefit reduction would depend on your current benefit.
Someone receiving the maximum of $5,181 per month would see their payment decline by $1,139.82 per month and lose $273,556 in Social Security income due to the automatic benefit reduction.
As for retirees with other current benefit amounts, here’s how much would disappear over two decades thanks to a 22% cut:
- If your benefit is $1,500, your 20-year losses would total $79,200
- If it’s $2,500, they’d total $132,000
- If it’s $3,500, you’d lose out on $184,800
- If you’re collecting $4,500, you’d lose $237,600
Again, this doesn’t even factor in the impact of COLAs. That’s just the amount of income you’d miss under today’s benefit.
Will benefit cuts happen, or is there a way out?
Obviously, most retirees would be very unhappy to lose hundreds of thousands of dollars due to a trust fund shortfall. And lawmakers know that, so there’s a good chance that they’ll at least try to find a solution to stave off benefit cuts.
Politicians have actually done this in the past, as Social Security reforms went into effect in 1983 when Social Security was last facing financial trouble. Those reforms gradually raised the full retirement age from 65 to 67 and introduced a new tax on Social Security benefits for higher earners.
However, reaching a similar deal today may be difficult because partisanship is much worse today than during the 1980s, and the longer lawmakers wait, the more expensive a solution becomes. It remains to be seen whether lawmakers can set their politics aside before a crisis occurs.
Bottom line
Social Security provides critical benefits for seniors, and if lawmakers don’t act, the costs will be extremely high.
Current and future retirees don’t have control over Congress, although they can certainly vote and call their representatives to make their voices heard. But they do have control over their own retirement planning.
One option is to try to delay your Social Security claim. This can increase your monthly benefit by allowing you to avoid early filing penalties and earn delayed retirement credits. A higher base benefit means you’ll start with more income, so a big cut could hurt less.
However, the best way to ensure a secure retirement is to save and invest so you have money to live on no matter what happens to Social Security.
If you are already retired or nearing retirement and haven’t done so, adjusting your budget, looking into part-time work, and delaying your benefits claim could all be good ways to prepare for a potential Social Security cut.
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Author Details
Christy Rakoczy Bieber
Christy Rakoczy Bieber is an attorney turned personal finance writer who has spent 17 years helping readers understand Social Security: the claiming rules, the policy shifts, and the fine print that can mean thousands of dollars in lifetime income. Her work has appeared in Kiplinger, Forbes, The Motley Fool, and the Wall Street Journal.
