Social Security's retirement program currently provides benefits to 63 million Americans, including retirees, spouses, dependents, and survivors, according to the Committee for a Responsible Federal Budget (CRFB).
The United States has known for 42 years that Social Security would eventually face financial trouble if no changes were made. For the past 16 years, Social Security's retirement program has spent more money than it received through cash income and has been using trust fund reserves to continue paying benefits.
The Social Security Trustees project that the retirement trust fund will run out of money in 2032, which is less than seven years away. Once the trust fund is exhausted, Social Security can legally pay out only what it collects in revenue.
As a result, retirees could face an immediate 24% cut in benefits when the trust fund becomes insolvent in 2032, as per the CRFB analysis.
The CRFB estimates that the average monthly benefit cut across the country would be around $500 per retiree, if the 24% reduction takes effect.
More than 15% of residents could be affected in 47 states, with states like Delaware, Maine, Michigan, Montana, New Hampshire, Pennsylvania, South Carolina, Vermont, West Virginia, and Wisconsin facing the largest share of residents affected.
The economic impact of a 24% Social Security benefit cut could exceed 1% of GDP in 40 states, with West Virginia facing the biggest impact, with lost benefits equal to 1.9% of GDP.
The CRFB said no state would escape the effects of Social Security insolvency and urged policymakers to act before 2032 to avoid sudden and deep benefit cuts.
