Newly retired couples may lose $16,900/year in Social Security in 2033

Newly retired, average dual-income couples planning to retire in six years should expect to receive $16,900 less in annual Social Security benefits if Congress continues to do nothing to shore up the funds used to pay beneficiaries, according to the nonpartisan, nonprofit Committee for a Responsible Federal Budget think tank.

The trust fund that supplements incoming payroll taxes to pay monthly Social Security benefits is expected to run dry by the end of 2032, according to the program's trustees . When that happens, the law requires benefits to be reduced by an estimated 22% to ensure the program's costs do not exceed its revenues.

That's when today's 61-year-olds will reach their normal retirement age and when today's youngest retirees will turn 68.

"Social Security's insolvency is no longer a crisis for future lawmakers to deal with," CRFB's report said. "Senators elected this year will be in office when Social Security's retirement fund is exhausted."

The longer Congress sits on its hands, the worse it will get for Social Security recipients, analysts said.

"These cuts are projected to grow over time due to the rising gap between Social Security's costs and dedicated revenues," CRFB said. "At the end of the century, annual benefit cuts are expected to reach 35%."

Even worse, lower Social Security benefits will come around the same time Medicare will have to implement cuts of its own.

The fund that helps fund Medicare Part A, which pays for services such as inpatient hospital stays, skilled nursing and other post-acute care services, and hospice care for Medicare beneficiaries, is expected to be depleted around the middle of 2033 . At that point, the fund will be able to reimburse providers only 89 cents for every dollar of Part A services provided.

That means an 11% cut in spending or substantial tax increases will be needed to cover the shortfall, said Ciannah Correa and Erica Socker in a blog last month for Georgetown University's Medicare Policy Initiative.

But Medicare Part A cuts are only part of Medicare's issues, they said. "Perhaps an even more important part of the story relates to spending in the rest of the Medicare program," the researchers wrote. Medicare also encompasses Part B for outpatient care, doctor visits, preventive services, and medical supplies, and Part D drug coverage.

Part B and Part D aren't in danger of insolvency because they're financed through a combination of Medicare beneficiary premiums and federal general revenue, primarily corporate and personal income taxes. As the cost of providing the services covered by Parts B and D grows, so do premiums beneficiaries pay and tax revenues needed to fund the Medicare program.

In 2026, the standard monthly Part B premium jumped by almost 10% to $202.90, exceeding $200 a month for the first time and are forecast to increase by 6.6% on average over the next 10 years, the program's trustees said. Part D premiums will grow at an even faster pace.

"As the cost of Part B and D benefits increases over time, a greater share of beneficiaries' Social Security benefits will likely go to paying these higher out-of-pocket costs," Correa and Socker said. "The combined average premiums and cost-sharing that beneficiaries pay for Parts B and D are about one-quarter of the average Social Security benefit in 2026. By 2050, premiums and cost-sharing will increase to more than one-third of the average benefit."

A bipartisan group of senators introduced legislation this week to fast-track any Social Security-saving bills. A bipartisan, seven-member Social Security Advisory Board would draft a bill to keep the program's trust funds solvent for at least the next half century, and be introduced in the House and Senate by congressional leaders before being considered by committees, which could hold hearings and revise the legislation.

To become law, the bill would still need 60 votes in the Senate and a majority vote in the House.

Though analysts applauded the bill, the board still needs to develop a plan, even though ideas aren't in short supply. For years, analysts have floated many ideas, but none have gained traction.

Ideas range from boosting the payroll tax that helps fund Social Security to raising the full retirement age . CRFB this year proposed a $100,000 ceiling on the total annual Social Security benefit for a couple at full retirement age and a $50,000 limit for a single retiree starting this year. Former Social Security Administration Commissioner Martin O'Malley said lawmakers should raise the cap on earnings subject to Social Security payroll taxes rather than pursue benefit reductions.