For close to 90 years now, Social Security has been a source of revenue for millions of retirees and other beneficiaries. However, recent data indicates that soon, the retirees could face a threat to their benefits in the near future. According to government projections and recent surveys, automatic cuts could hit retirees by nearly $4,600 annually.
Survey Data Shows Widespread Vulnerability
According to data from Nationwide’s Social Security Consumer Survey, many retirees would suffer financial stress if their monthly benefits were cut or if they missed. Here are more figures that show how financially fragile households are:
- 14-15% of recipients involved in the survey strongly agreed that they could not survive if they missed one monthly check.
- 30% said they “somewhat agree” that they would not survive if they missed one monthly payment.
- 74% retirees said that they were worried that Social Security would run out during their lifetime.
- 83% were concerned about the long-term future of the Social Security fund.
Financial experts sent warnings to retirees who only rely on Social Security benefits, saying that they were at high risk.
“Those who rely 100 percent on their benefit to survive are the ones who are financially at risk, given the fact that any cut would be detrimental to their finances,” explained Kevin Thompson, CEO of 9i Capital Group.
What the Cuts Could Mean
If the Social Security fund became insolvent by 2033-2034 as projected, the system would only be able to pay about 80% of scheduled benefits.
That means a deduction of 19-20% on monthly checks, which translates to approximately $4,573-$4600 annual cut for the average retiree. This cut would be enough to cause financial struggles among many seniors who are already struggling with inflation. Sadly, some would even find it hard to afford basic commodities like food, medicine, and housing.
“The reality is most Americans don’t have enough saved for their senior years, and without Social Security, they wouldn’t stand a chance of making up the monthly gap needed to get by.” Said Alex Beene, a financial literacy instructor at the University of Tennessee at Martin.
Why Cuts Are Looming
The looming cuts are not only tied to politics but also to demographics. As record numbers of baby boomers go to retirement, the ratio of workers left paying into the Social Security fund is decreasing. In 1945, for every retiree, there were 42 workers, while today there are fewer than three workers for every retiree.
The Social Security Administration will not be able to afford to process payouts as promised without new funding. To solve the deficit, lawmakers are weighing options such as adjusting benefit formulas, raising payroll taxes, and increasing the retirement age further.
Who’s Most at Risk?
The possible cuts in Social Security benefits would affect all 70 million beneficiaries. However, the following groups would feel the impact most:
- Low-income retirees who entirely rely on their Social Security benefits.
- Middle-income households are already struggling amid high inflation and the increased cost of healthcare.
- Future retirees who could see their lifetime earnings reduced by over $100,000, according to past analyses.
Will Lawmakers Stop a $4,600 Annual Cut for Retirees?
Experts say that the cuts are no guaranteed to happen. However, to prevent it, Congress must find solutions as soon as possible because time is running out.
“In today’s economy, with high inflation and so much uncertainty, most people can’t save enough on their own. Their financial security will depend on whether Social Security remains solvent in the decades ahead,” warned Alex Beene, a financial literacy instructor.
For now, beneficiaries of Social Security should push their representatives to find solutions and pass them. Without solutions to fund the Social Security trust fund, millions will see their checks cut by almost $4,600 annually.