What It Means for You
As you just read, Social Security’s trust fund will officially reach insolvency in 2032. Without a surplus to plug the hole in revenue, there won’t be enough money to cover the cost of benefits.
BENEFIT CUTS
When that happens, federal law says the Social Security Administration must cut benefits for all current retirees by the percentage of the shortfall in revenue.
That’s a complicated way of saying that, based on current projections, benefit checks for all retirees will be cut by 22%, starting in 2032.
Impact: Average-Income Earners
When you’re in retirement and on a fixed income, getting less money than you were expecting is never a good thing. You're watching every penny and spending wisely, and a benefit cut will hurt.
Let’s use some real numbers to put the benefit cut into perspective.
Imagine a retiree who worked for 40 years and retired in 2033 at full retirement age. This retiree made an average of around $82,199 during their top 35 years of earnings. We'll call her Donna.
Under Social Security’s current benefit calculation, Donna's annual benefit should be $32,551.
But if we don’t shore up Social Security’s solvency, its trust fund will run out of money in 2032.
The result? Donna's annual benefit will be cut by 22%—from $32,551 a year to $25,390.
Impact: LOW-INCOME EARNERS
Now let’s look at another retiree. We'll call him Charlie.
Charlie also worked for 40 years and began collecting Social Security in 2033, at full retirement age. But during his working years, Charlie's salary was much lower. In fact, most years he was living just above the poverty line. During his highest 35 years of earnings, he earned an average of $20,538.
He’s now slated to collect $15,034 a year from Social Security.
However, if we don’t shore up Social Security’s solvency, Charlie's benefit will also be cut by 22%—to $11,727.
To put this into perspective, U.S. News & World Report ranked Midland, Michigan, as the best place to retire in 2026. After a 22% benefit cut, Charlie's monthly Social Security check wouldn't cover his monthly rent for an apartment there (median cost: $1,016)—never mind prescription drugs, groceries, and utilities.
Our hope is that someone with Donna's earnings history also has access to a retirement account and extra money that could help blunt the impact of a reduction in the monthly benefit she receives from Social Security. It is unlikely that Charlie’s salary allowed him to save much for retirement.
Regardless, a benefit cut like that for most senior citizens will be devastating, and they may have no choice but to reach out to family members like yourself for assistance.
