Social Security Update: By 2033, Benefit Reductions of $13,100 Are Likely

You may be aware that a sizable Social Security trust fund will vanish in approximately ten years, taking with it a sizable portion of retirement income. But until recently, it was challenging to put a price tag on the prospective effect on Social Security recipients. Now that we know, we can prepare for it. One estimate states that the impact may be more than $13,000 per month for certain couples.

Estimating the potential impact on Social Security recipients was difficult. Knowing this, we can get ready for it. According to one estimate, the effect might cost some couples more than $13,000 each month. (Photo: Bloomberg)

Social Security’s funding will exclusively come from payroll taxes

In a report from GOBankingRates, the median recently retired single-income couple will experience a reduction of $13,100 per year after Social Security’s Old Age and Survivors Insurance (OASI) Trust Fund runs out of money, according to a recent research from the nonprofit Committee for a Responsible Federal Budget (CRFB). That is anticipated to occur in around ten years. When that happens, Social Security’s funding will exclusively come from payroll taxes, which currently only cover roughly 77% of payments.

The CRFB estimates that newly retired dual-income couples will be particularly affected, losing more than $17,000 annually- Benefit Reductions.

Depending on the income, different cutbacks would apply. For instance, according to the CRFB, a low-income, dual-income couple retiring in 2033 would see a $10,600 yearly reduction while a high-income, dual-income pair would experience a $23,000 reduction.

According to the CRFB, even if the cut for a low-income couple would be smaller, it would still represent a bigger portion of their income, causing elder poverty to increase dramatically in the event of insolvency.

READ ALSO: Three Ideas To Reduce Social Security Taxes

Social Security itself won’t be affected by the planned reduction, Benefit Reductions

According to the CRFB, an average dual-income couple would lose $14,000 after inflation, while low-income couples would lose $8,500 and high-income couples would lose $18,500.

It’s crucial to remember that Social Security itself won’t be affected by the planned reduction, the Benefit Reductions. Without the OASI money, the program will still be able to pay more than 75% of current payments because it is mostly supported by payroll taxes.

Even still, a few lawmakers have offered ideas to “fix” Social Security by either raising taxes or reducing benefits. Here are a few of their suggestions:

• Charge a fee to the wealthy
• Increase the age at full retirement
• General benefit reductions
• Raising payroll taxes

READ ALSO: Up To $4,555 Social Security Direct Payment To Each Seniors To Be Released Next Week!