According to the Committee for a Responsible Federal Budget (CRFB), Social Security’s retirement program currently provides benefits to 63 million Americans, including retirees, spouses, dependents and survivors. The United States has known for 42 years that without changes, Social Security would eventually face financial difficulties. For the past 16 years, the Social Security retirement program has spent more than it has funded through cash receipts and has used trust fund reserves to continue paying benefits.
Social Security trustees expect the retirement trust fund to run out of money in 2032, less than seven years away. Once the trust fund is depleted, Social Security can only legally pay out the amount it collects from income. Therefore, when the trust fund becomes insolvent in 2032, retirees’ benefits could be immediately reduced by 24%, according to CRFB’s analysis. CRFB research examined what a 24% benefit cut would mean for retirees, state economies and communities across the United States.
CRFB estimates that if the 24% cut goes into effect, the average monthly benefit per retiree nationwide will be reduced by about $500. The national average loss is $500 per month, which is more than the average retired household spends on groceries each month.
In 29 states, the average monthly benefit reduction will be more than $500. A CRFB analysis using current state-level data said the average monthly cuts across states are expected to be between $459 and $556. Connecticut will face the highest average monthly benefit loss at $556.
New Jersey retirees lose an average of $554 per month. The average monthly tax reduction in New Hampshire is $553. Delaware retirees lose about $549 a month. Maryland would face an average monthly loss of $541. Other states in the top 10 with the largest monthly cuts include Washington ($531), Minnesota ($530), Massachusetts ($527), Michigan ($523) and Utah ($523).
Social Security benefit cuts will directly affect approximately 63 million Americans. This group includes 54 million retired workers and approximately 9 million survivors and dependents. Nationwide, about one in five Americans would be affected by a 24% benefit reduction, according to the CRFB report.
More than 15% of the population in 47 states will be directly affected. The proportion of residents affected ranges from 10% to 23%, depending on the state. States with the largest percentages of affected residents 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 with the highest rates of residents relying on Social Security benefits.
The report estimates that a 24% cut in Social Security benefits would reduce benefits nationwide by about $345 billion over one year. According to the CRFB report, total losses are equivalent to approximately 1.1% of U.S. GDP.
In 40 states, the economic cost of benefit reductions would exceed 1% of the state’s GDP. West Virginia will face the greatest impact, with lost benefits equivalent to 1.9% of GDP. Mississippi and Vermont’s losses would each be equivalent to 1.8% of GDP. South Carolina and Maine would each lose benefits equivalent to 1.7% of GDP. Michigan, Montana, Arkansas and Alabama would each face losses equivalent to 1.6% of GDP. Idaho’s losses would be equivalent to 1.5% of GDP.
CRFB said states with older populations and lower incomes will typically suffer the greatest economic impacts.
In total dollar terms, California would face the largest reduction, with a loss of about $33 billion in annual Social Security benefits, according to the analysis. Florida will lose approximately $27 billion. Benefit cuts in Texas total about $24 billion. New York will lose approximately $20 billion. Pennsylvania faces approximately $16 billion in annual losses.
CRFB says no state can escape the effects of Social Security bankruptcy. The group warned that potential benefit reductions could be financially devastating for millions of retirees and their families. The report points out that Social Security has provided Americans with financial security for more than 90 years.
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 cuts to benefits. According to CRFB, the expected bankruptcy date is within the terms of the next elected president and members of Congress.
The group said elected leaders and candidates should come up with plans to strengthen social protection before the trust fund runs out. The CRFB concluded that without action, a 24% across-the-board benefit cut could become a reality by 2032, affecting retirees in every state.
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