Social Security payments wouldn’t stop, but benefits could be cut under new projection

A new report suggests Social Security’s retirement trust fund could be depleted by late 2032, leading to significant benefit cuts unless Congress intervenes.

SACRAMENTO, Calif. — A new report from Social Security trustees projects the program’s retirement trust fund will be depleted in late 2032, potentially leading to smaller monthly checks for millions of Americans if Congress does not take action.

While the projection may sound alarming, Joseph Eschleman, president and founder of Towerpoint Wealth in Sacramento, said it does not mean Social Security payments would stop entirely.

This story continues below.

More in Dollars and sense

“Because 80% of Social Security is being funded through payroll taxes, the whole Social Security system is not facing insolvency,” Eschleman said.

Instead, the depletion of the retirement trust fund would result in reduced benefits for recipients. According to the report, benefits would be automatically cut by 24% upon trust fund depletion.

That reduction could mean a loss of about $500 per month for some Social Security recipients.

“There is no painless solution, right? There is a solution. I’ll say that’s good news, right? It’s going to be painful for probably most recipients of Social Security in one way, shape or form,” Eschleman said.

The report also moved the projected depletion date forward by about three months compared with last year’s forecast.

Eschleman said the findings underscore the importance of personal retirement planning in addition to Social Security benefits.

“There is more of a personal responsibility that we now have to be prudent, pay ourselves first, maximize how you’re saving and investing for your own retirement, to be able to have enough of a pool of money or a portfolio, to which Social Security can then complement to derive an appropriate retirement income stream,” Eschleman said.

The findings could increase pressure on lawmakers to address the program’s long-term financial challenges.

“There’s still time to be making these adjustments. It’s just a matter of how they’re going to solve for it,” Eschleman said.

If Social Security becomes insolvent in 2032, a report from the Committee for a Responsible Federal Budget projects California would rank first in the nation for total benefits lost, with more than $33 billion in lost benefits and 6 million residents affected.

The report estimates the average California retiree would see a monthly benefit reduction of about $490.

Kids learn money skills with debit card program | Dollars & Sense