Social Security is facing a serious funding shortfall that will cause it to run out of money sooner than projected.
The Congressional Budget Office initially projected as of last year that Social Security would run out of money in 2033.
Now, the Congressional Budget Office is saying that Social Security could run out of money a year sooner in 2032 due to a provision in the One Big Beautiful Bill Act (OBBBA) that allows seniors to deduct up to $6,000 off their benefits tax-free, according to Yahoo News.
To address this budget shortfall, there are proposals to make cuts to Social Security.
READ MORE: “Social Security COLA 2027 projection released, and the amount may surprise you”
For example, a plan called “The Six-Figure Limit” is in the works to cap retiree benefits at $50,000 for single retirees and $100,000 for retired couples.
Here’s what you need to know about the plan.
The “Six-Figure Limit” is a proposal by the advocacy group the Committee for a Responsible Budget.
The proposal is designed to cap Social Security payments to beneficiaries at $50,000 per person or $100,000 per couple to address a 24% budget cut in Social Security projected by 2032, according to the American Enterprise Institute.
If the program works as it is intended, it would close approximately three-fifths of Social Security’s shortfall over the next 75 years.
The cap would primarily affect higher-income retirees, who may or may not rely on the year-to-year COLA increases.
There are alternatives to Social Security benefit cuts, such as increasing the Social Security payroll tax rate or raising the full retirement age to qualify for Social Security.
However, these solutions would affect workers who would pay higher tax rates or delay retirement for many already in the workforce.
It may even affect people who cannot work until full retirement age due to health issues or other circumstances.
Regardless of whether or not Social Security benefit cuts happen, it is always a good idea to be prepared.
A good way to do this is to contribute consistently to an IRA or 401(k).
Investing in a diverse portfolio, low-cost index funds and even taking on side jobs to boost income can all help reduce reliance on Social Security should cuts occur.”
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