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.<\/p>\n
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\u2019s trustees. When that happens, the law requires benefits to be reduced by an estimated 22% to ensure the program\u2019s costs do not exceed its revenues.<\/p>\n
That\u2019s when today\u2019s 61-year-olds will reach their normal retirement age and when today\u2019s youngest retirees will turn 68.<\/p>\n
\u201cSocial Security\u2019s insolvency is no longer a crisis for future lawmakers to deal with,\u201d CRFB\u2019s report said. \u201cSenators elected this year will be in office when Social Security\u2019s retirement fund is exhausted.\u201d<\/p>\n
Is a 22% Social Security cut the worst of it?<\/p>\n
The longer Congress sits on its hands, the worse it will get for Social Security recipients, analysts said.<\/p>\n
\u201cThese cuts are projected to grow over time due to the rising gap between Social Security\u2019s costs and dedicated revenues,\u201d CRFB said. \u201cAt the end of the century, annual benefit cuts are expected to reach 35%.\u201d<\/p>\n
Lower Social Security benefits as Medicare implements cuts<\/p>\n
Even worse, lower Social Security benefits will come around the same time Medicare will have to implement cuts of its own.<\/p>\n
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.<\/p>\n
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\u2019s Medicare Policy Initiative.<\/p>\n
But Medicare Part A cuts are only part of Medicare\u2019s issues, they said. \u201cPerhaps an even more important part of the story relates to spending in the rest of the Medicare program,\u201d the researchers wrote. Medicare also encompasses Part B for outpatient care, doctor visits, preventive services, and medical supplies, and Part D drug coverage.<\/p>\n
Part B and Part D aren\u2019t in danger of insolvency because they\u2019re 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.<\/p>\n
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\u2019s trustees said. Part D premiums will grow at an even faster pace.<\/p>\n
\u201cAs the cost of Part B and D benefits increases over time, a greater share of beneficiaries\u2019 Social Security benefits will likely go to paying these higher out-of-pocket costs,\u201d Correa and Socker said. \u201cThe 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.\u201d<\/p>\n
What can Congress do for Social Security?<\/p>\n
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\u2019s 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.<\/p>\n
To become law, the bill would still need 60 votes in the Senate and a majority vote in the House.<\/p>\n
Though analysts applauded the bill, the board still needs to develop a plan, even though ideas aren\u2019t in short supply. For years, analysts have floated many ideas, but none have gained traction.<\/p>\n
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\u2019Malley said lawmakers should raise the cap on earnings subject to Social Security payroll taxes rather than pursue benefit reductions.<\/p>\n
Even USA Today readers have chimed in with their ideas:<\/p>\n
Air Force veteran David Varley, 78, is in line with O\u2019Malley\u2019s idea. \u201cWhat seems to me to be the least painful approach would be to eliminate the income cap altogether, having the rich pay in all year,\u201d he said. \u201cI took a look at 2024 payroll figures. There were 134.8 million taxpayers, of which 16% earned over $200,000. This is 21.6 million taxpayers. These are the people who would probably not miss this increase to their taxes since they have been paying the tax most of the year until they hit the cap.\u201d Varley said he conservatively calculated the move could add $41.5 billion to the fund.Retired midlevel Fortune 500 manager Joseph Jason Jr., 70, suggests allowing Americans to choose a one-time tax-free Roth conversion that would waive their rights to any Social Security benefits for the rest of their lives. \u201cThose of us who are fortunate to partake in this would result in at least $1 million of payment avoidance from the Social Security fund over a lifetime,\u201d he said. He acknowledges the government would lose tax revenue, but he said he felt the benefits of keeping Social Security solvent for those who need it outweighed the tax loss.<\/p>\n
No matter how many ideas are floated, it\u2019s up to Congress to choose one and act. But \u201cI believe our elected officials will shy away from any changes that will potentially impact votes,\u201d Jason said.<\/p>\n","protected":false},"excerpt":{"rendered":"Newly retired, average dual-income couples planning to retire in six years should expect to receive $16,900 less in…\n","protected":false},"author":2,"featured_media":561977,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[72,176,61,60,174,175],"class_list":["post-561976","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-finance","tag-ie","tag-ireland","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/561976","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=561976"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/561976\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/561977"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=561976"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=561976"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=561976"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}