The 2032 Cut Would Take $1,140 a Month From Social Security’s Biggest Checks
Social Security's trust fund has a potential depletion date that could trigger automatic benefit cuts, and the seniors who built the biggest monthly checks may face the steepest dollar losses when the bill comes due.
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There have been rumors flying that Social Security is about to go bankrupt. And thankfully, they’re not true.
Social Security is primarily funded by payroll taxes. So as long as people continue to work and pay into the system, the program can continue to pay benefits.
But due to a shrinking labor force and a growing number of retirees, in the coming years, Social Security won’t take in enough payroll tax revenue under the current system to keep up with benefit payments. Once the trust fund it’s been relying on runs dry, the program may have to cut benefits broadly.
The most recent update from the Social Security Trustees revealed that benefits could be cut by 22% as early as 2032. And there’s one group of people who could see their monthly checks shrink by well over $1,000 in that scenario.
Some seniors could lose out on $1,140 per month
Social Security’s maximum monthly benefit today is $5,181. People who are entitled to that benefit must meet three criteria:
- Work at least 35 years
- Earn the equivalent of Social Security’s wage cap for 35 years
- Delay their Social Security claims until age 70
People who receive $5,181 per month in Social Security could see those checks lose about $1,140 per month if a 22% cut happens. And while it’s easy to say that those with the largest Social Security benefits are probably in the best position to absorb a big cut, it’s a problem nonetheless.
Although many high earners do manage to save well for retirement, those who are counting on boosted benefits may not end up with all of the money they expect if cuts happen. That could alter a lot of people’s retirement plans.
Of course, a 22% cut could be devastating for seniors who receive smaller Social Security checks, too. The average monthly benefit today among retirees is $2,084. A 22% cut would reduce those checks by $458 a month, which could hurt badly for seniors who do not have savings to fall back on.
Social Security cuts aren’t a given
The positive news in all of this is that Social Security cuts are not guaranteed to happen. Congress can make changes to prevent broad cuts. The problem is that those changes could have their own negative impact.
Some of the more popular solutions for preventing Social Security cuts include:
- Raising the current 12.4% Social Security payroll tax rate
- Raising the program’s wage cap, or getting rid of it entirely
- Raising Social Security’s full retirement age, which is currently 67 for anyone born in 1960 or later
Ultimately, something will probably have to give to prevent Social Security cuts. But it’s important for today’s workers to prepare for potential cuts, just in case.
For higher earners looking at a monthly benefit of over $5,000, a 22% cut might hurt the most on a dollar-for-dollar basis. But people in that position may be well equipped to boost savings to compensate. It’s average and lower earners who might really struggle if Social Security cuts happen, even if they lose less money in their monthly checks.
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Maurie Backman has more than a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate. Her work has appeared on sites that include The Motley Fool, USA Today, U.S. News & World Report, and Kiplinger.
Prior to becoming a full-time financial writer, Maurie worked in the financial industry trading distressed debt. She then changed course and spent a few years designing electronic toys. After a stint in content marketing and UX, she shifted back into writing and has since covered everything from the housing market to estate planning to Medicare.
When she's not busy writing, Maurie can be found hiking, walking her dogs, driving her kids to their various sports practices and games, and curling up with a good book. She cooks on occasion and bakes way too often.
