According to a new government report that has been released, retirees may have to forget full Social Security checks. In its 2024 annual report, the Social Security Board of Trustees now projects that the Social Security retirement trust fund will be depleted by 2033, which is one year earlier than the previous projection.
This updated forecast, released in conjunction with the Centers for Medicare & Medicaid Services (CMS) signals a potential reduction of up to 23% in benefits if Congress fails to come up with measures to save the Social Security trust fund.
The looming insolvency affects the Old-Age and Survivors Insurance (OASI) Trust Fund, which provides monthly payments to millions of retired workers and their dependents. Estimates indicate that revenue from ongoing payroll taxes will only be enough to cover approximately 77% of scheduled benefits. Therefore, millions of retirees will be forced to adjust to lower monthly checks.
This change is not speculation but a warning that is backed by decades of data and economic projections. Unless lawmakers act fast, the financial impact may be felt by both current and future retirees.
Government Report Moves Up Depletion Date
Current projections now indicate that the Social Security trust fund may run out by 2033, and not 2034 as previously forecasted. That is only nine years away, and if that happens, the government says that only 77% to 80% of benefits will be payable.
The change in projections is fueled by several converging issues, including the enactment of the Social Security Fairness Act, which expanded benefits for nearly 3 million retired public sector workers. While the Act repeals provisions that were unfair to some workers, it has accelerated the drain on the trust fund.
Why This Should Worry Retirees and Workers Alike
“Twenty-seven percent of our population is solely reliant on Social Security as their only form of income,” says Kyle Lucey, a retirement planning specialist at Trinity Wealth Advisors in Williamsville, NY. That means more than a quarter of Americans are at risk of having their only source of income slashed by up to 23%.
This trend is driven by the retirements of baby boomers, longer life expectancy, and lower birth rates. These demographic shifts mean that there are fewer workers paying into the system, and more people drawing benefits for longer periods.
What Could Change Next
Several possible solutions have been suggested by lawmakers and experts, one being to raise the Social Security Full Retirement Age (FRA). The current early retirement age is 62, and the FRA is 67; these numbers could be raised to 65 and 70, respectively.
Another solution is to increase the income cap on Social Security payroll taxes. Currently, income up to $176,000 is subject to the Social Security tax. By raising that limit, high earners would contribute more, thus reducing the deficit.
Younger Generations Hit Hardest
While near-retirees may still receive their benefits when they get into retirement, younger generations, especially Gen Z, may receive less than the full benefit or no benefits at all. Financial planners are already advising millennials and Gen Z to prepare for retirement, assuming that they will receive less benefits or no benefits at all.
“Stress-testing plans with reduced Social Security benefits can be helpful,” says Kevin Brady, CFP at Wealthspire Advisors.
What You Can Do Now
Since we cannot control Congress, you can have control over how to prepare for retirement. Experts insist on early planning and disciplined saving. You can start saving by starting a Roth IRA or increasing your 401(k) contributions.
Since Congress has not acted, it would make sense to assume your full Social Security check and start making bold and informed decisions regarding your retirement.