Social Security’s retirement program currently provides benefits to 63 million Americans, including retirees, spouses, dependents, and survivors, according to the Committee for a Responsible Federal Budget (CRFB). The United States has known for 42 years that Social Security would eventually face financial trouble if no changes were made. For the past 16 years, Social Security’s retirement program has spent more money than it received through cash income and has been using trust fund reserves to continue paying benefits.
(AP Photo/Nam Y. Huh, File) (AP)
The Social Security Trustees project that the retirement trust fund will run out of money in 2032, which is less than seven years away. Once the trust fund is exhausted, Social Security can legally pay out only what it collects in revenue. As a result, retirees could face an immediate 24% cut in benefits when the trust fund becomes insolvent in 2032, as per the CRFB analysis. The CRFB study examined what a 24% benefit cut would mean for retirees, state economies, and communities across the United States.
Monthly benefit losses could exceed $500 in many states
The CRFB estimates that the average monthly benefit cut across the country would be around $500 per retiree, if the 24% reduction takes effect. The national average monthly loss of $500 is more than what the average retired household spends on groceries each month.
In 29 states, the average monthly benefit reduction would be more than $500. The estimated average monthly cuts across states would range from $459 to $556, as noted by the CRFB analysis using current state-level data. Connecticut would face the highest average monthly benefit loss at $556.
New Jersey retirees would lose an average of $554 per month. New Hampshire would see an average monthly cut of $553. Delaware retirees would lose about $549 per month. Maryland would face average monthly losses of $541. Other states among the top 10 for largest monthly cuts include Washington ($531), Minnesota ($530), Massachusetts ($527), Michigan ($523), and Utah ($523).
More than 15% of residents could be affected in 47 states
A Social Security benefit cut would directly impact about 63 million Americans. This group includes 54 million retired workers and around 9 million survivors and dependents. Nationally, roughly one in five Americans would be affected by a 24% benefit reduction, as per the CRFB report.
More than 15% of the population would be directly affected in 47 states. The share of residents impacted would range from 10% to 23% depending on the state. States with the largest share of residents affected include Delaware, Maine, Michigan, Montana, New Hampshire, Pennsylvania, South Carolina, Vermont, West Virginia, and Wisconsin.
The CRFB also identified Maine, West Virginia, Vermont, Delaware, Montana, and New Hampshire as states where the highest proportion of residents rely on Social Security benefits.
Economic impact could exceed 1% of GDP in 40 states
The report estimates that a 24% Social Security benefit cut would reduce benefits by about $345 billion nationally in a single year. The total loss would equal approximately 1.1% of U.S. GDP, as cited in the report by CRFB.
In 40 states, the economic hit from benefit reductions would exceed 1% of state GDP. West Virginia would face the biggest impact, with lost benefits equal to 1.9% of GDP. Mississippi and Vermont would each see losses equal to 1.8% of GDP. South Carolina and Maine would each lose benefits equal to 1.7% of GDP. Michigan, Montana, Arkansas, and Alabama would each face losses equivalent to 1.6% of GDP. Idaho would see losses equal to 1.5% of GDP.
The CRFB said states with older populations and lower incomes would generally suffer the biggest economic effects.
Biggest dollar losses expected in large states
In total dollar terms, California would face the largest reduction, with about $33 billion in lost Social Security benefits annually, as per the analysis. Florida would lose around $27 billion. Texas would see benefit reductions totaling roughly $24 billion. New York would lose about $20 billion. Pennsylvania would face annual losses of around $16 billion.
Policymakers urged to act before 2032
The CRFB said no state would escape the effects of Social Security insolvency. The organization warned that the potential benefit reductions could be financially devastating for millions of retirees and their families. The report noted that Social Security has provided financial security to Americans for more than 90 years.
The CRFB said lawmakers have several options to restore Social Security’s finances while protecting retirement security. However, the group stressed that policymakers must act quickly to avoid sudden and deep benefit cuts. According to the CRFB, the projected insolvency date falls during the terms of the next elected president and members of Congress.
The organization said elected leaders and candidates should present plans to strengthen Social Security before the trust fund runs out. The CRFB concluded that without action, a 24% across-the-board benefit cut could become reality in 2032, affecting retirees in every state.