by Millions of Americans who rely on Social Security could be facing substantial benefit reductions in less than a decade if lawmakers do not find a solution to the program’s funding crisis. A new analysis by the Committee for a Responsible Federal Budget (CRFB) has warned that retirees could lose as much as $18,100 annually beginning in 2033.
Stark Projections Highlight Urgent Need for Reform
According to the CRFB’s report, a medium-income couple with dual earners retiring in 2033 would see their annual benefits slashed by approximately $18,100. For single-income couples, the cut would be around $13,600. Even low-income dual-earner couples could lose nearly $11,000 per year. High-income couples might face reductions nearing $24,000 annually.
Although the dollar figures vary depending on marital status, income level, and work history, the percentage cut across the board would represent a significant blow to household finances. Lower-income households would feel the greatest proportional impact.
Social Security’s Funding Problem
Social Security benefits are paid out using payroll tax revenues and the program’s trust funds: the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) funds. These combined funds are projected to be depleted by 2034, according to the Social Security Trustees’ most recent report. Without action from Congress, incoming payroll tax revenue alone would cover only 79 percent of scheduled benefits—triggering an automatic 21 percent reduction in payments.
However, the CRFB projects an even greater cut of 24 percent, driven in part by recent legislation. The newly enacted One Big Beautiful Bill Act (OBBBA) reduces revenue from Social Security benefit taxation, contributing to the deeper projected shortfall.
Impact of the OBBBA
The OBBBA introduced tax cuts and expanded the senior standard deduction, which means nearly 90 percent of Social Security recipients will no longer pay income tax on their benefits. While this may provide immediate relief for many retirees, it significantly reduces the program’s future revenue.
“The tax rate cuts and increase in the senior standard deduction from the recently enacted OBBBA would reduce Social Security’s revenue from the income taxation of benefits, increasing the required cut by about a percentage point upon insolvency,” the CRFB stated. If these provisions are made permanent, the gap would widen further.
Lessons from the Past and Legislative Proposals
Social Security has faced insolvency threats before. In the early 1980s, a bipartisan congressional effort implemented reforms including tax increases, adjustments to the full retirement age, and partial taxation of benefits. Similar decisive action is now urgently required.
Several lawmakers have already proposed solutions. Senator Sheldon Whitehouse (D-RI) and Representative Brendan Boyle (D-PA) have reintroduced the Medicare & Social Security Fair Share Act, which would impose payroll taxes on wages and investment income over $400,000.
Meanwhile, a bipartisan plan from Senator Bill Cassidy (R-LA) and Senator Tim Kaine (D-VA) proposes creating a $1.5 trillion investment fund. This fund, financed upfront by the Treasury, would be invested in a diversified portfolio to generate long-term returns. After 75 years, the Treasury would be repaid, and the earnings would support future Social Security benefits.
What’s at Stake
Social Security remains a crucial pillar of retirement security for tens of millions of Americans. Without swift and substantial reform, future retirees face benefit cuts that could threaten their financial well-being. Lawmakers now face mounting pressure to address the funding shortfall and preserve the program for generations to come.
