A new Committee for a Responsible Federal Budget analysis warns that Social Security’s retirement trust fund could run out in 2032, cutting average monthly benefits by about $500 for 63 million Americans.
By yourNEWS Media Newsroom
Social Security retirees could face an automatic 24% benefit cut in 2032 if lawmakers do not act before the program’s retirement trust fund becomes insolvent, according to a new analysis from the Committee for a Responsible Federal Budget.
The report, released Wednesday, projects that 63 million Americans would be affected nationwide, including retirees, spouses, survivors and dependents. The reduction would cut the average monthly Social Security benefit by about $500.
The analysis warns that no state would be spared from the effects of insolvency. In 29 states, average monthly benefit reductions would exceed $500. Retirees in Connecticut, Delaware, Maryland, New Hampshire and New Jersey would face some of the largest average cuts, according to the report.
Social Security’s retirement program has spent more than it has collected in revenue for the past 16 years, CRFB said. The program has covered that shortfall by drawing from trust fund reserves. Once those reserves are depleted, federal law bars Social Security from paying more in benefits than it receives in incoming revenue.
That legal limit would trigger an across-the-board reduction unless Congress changes the program’s finances before insolvency arrives.
The report said more than 15% of residents would be directly affected in 47 states. The highest shares of affected residents would be in Maine, West Virginia, Vermont, Delaware, Montana and New Hampshire.
The fiscal impact would also extend beyond individual households. CRFB estimated that a 24% benefit cut would reduce Social Security payments by $345 billion nationally, equal to about 1.1% of U.S. gross domestic product.
In 40 states, the projected loss would exceed 1% of state GDP. West Virginia, Mississippi, Vermont, South Carolina and Maine would be among the states hit hardest relative to the size of their economies.
The largest reductions in total dollar terms would come in the nation’s most populous states. California would see about $33 billion in annual benefit cuts, followed by Florida at $27 billion, Texas at $24 billion, New York at $20 billion and Pennsylvania at $16 billion.
CRFB said the findings show that Social Security insolvency would not be limited to retirees alone, but would also affect state economies and communities that rely heavily on benefit payments.
The group urged policymakers to move quickly, saying that restoring solvency will require difficult decisions involving both taxes and benefits. Waiting longer, the report warned, raises the likelihood of sudden cuts that would apply to beneficiaries regardless of income or age.
“With less than seven years until Social Security is projected to be insolvent, policymakers need to enact changes to the program as quickly as possible,” the report concluded.
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