In the US, Social Security is getting close to a financial problem that could mean big cuts for more than 70 million people who depend on it. A new study by the Committee for a Responsible Federal Budget (CRFB) says that by 2033, benefits for the average couple could drop by $16,500 per year if nothing is done to fix the problem. This cut would cost a single worker making the average wage about $8,200 a year.
This study is based on a couple with two incomes, with each person making about $63,000 a year. But it also thinks that nothing will be done about the Social Security trust fund until 2033. Many experts don’t think this will happen because cutting benefits would have political consequences, but it could happen if nothing is done soon.
The Social Security trust fund at risk
The Old-Age and Survivors Insurance (OASI) Trust Fund is where most of Social Security’s money comes from. It is a $2.6-trillion balance that pays out benefits and covers other program costs. At the moment, Social Security gives out more benefits than it takes in in taxes. This is happening because more and more baby boomers are leaving.
The office has been using money from the trust fund to make up the difference. These resources are useful, but they are limited. If nothing major is done, the fund might run out by 2033, which would mean that all recipients would automatically see their monthly payments cut by 21%, no matter how much money they make or if they are married.
The impact of cuts on retirees
This shortfall would have big financial effects, especially for seniors now and in the future. Many people who get benefits are already living on very little money, and cutting them back would make things even worse for them. At the moment, about 40% of Americans over 65 depend only on Social Security, which gives them an average of $1,907.
A 21% cut in benefits for these people could put them below the poverty line. Shannon Benton, executive director of the Senior Citizens League, an organisation that fights for older Americans, says that this cut is likely to make more seniors poor, especially those with low incomes who haven’t been able to save for retirement and depend on Social Security a lot.
The need for timely solutions
We need to fix Social Security as soon as possible because it is having money problems that are getting worse. “Every year without a solution increases the cost of repair,” says Chris Towner, who is in charge of policy at the CRFB. At the moment, either a 27% tax hike or a 21% cut in payments for everyone could be needed to make Social Security stable. But if nothing is done right away, these numbers could go up to a 32% tax increase or a 25% cut in benefits.
Putting off finding a solution not only makes the problem worse, but it also makes things less certain for the millions of people who count on Social Security for their income.
Misunderstandings about insolvency
There is a lot of misunderstanding about what it would mean for Social Security to go bankrupt, even though people have been warned. A new study from Gallup finds that 80% of American adults are afraid that the program will not be around when they are old enough to retire. Even though going bankrupt doesn’t mean that Social Security will end completely, the planned changes could make a lot of people’s lives much worse.
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