Several analysts said that payout reductions for Social Security benefits of up to 20% may occur as early as 2032 if Congress doesn’t act to protect the program’s budget.
According to SSA, the average number of Americans receiving a Social Security benefit each month in 2023 will be close to 67 million, with an annual benefit payment of more than $1 trillion.
Payments would be reduced by 20% to $1,352, reversing the gains achieved in benefit increases via cost of living adjustments (COLAs), the most recent of which was granted earlier this year and increased payment levels by 8.7%.
More than half of retirees claim that even the larger adjustment isn’t enough to get by on.
Social Security Benefit Cut By 2034
The Motley Fool said the Board of Trustees believes that a drastic benefit decrease of up to 23% may be required by 2034 to maintain payments for the Old-Age and Survivors Insurance Trust Fund (OASI) until 2096 if politicians fail to alter Social Security and solve what is wrong with it. The OASI is the trust in charge of providing over 49 million retired employees with monthly cheques.
The average monthly payment for these retirees in February 2023 was $1,830.66. This typical retired worker should be receiving $2,276.20 per month in 2034 if the conservative assumption is that Social Security’s cost-of-living adjustment (COLA), or the “raise,” passed along most years to account for the effects of inflation, grows by an average of 2% annually through that year.
The typical retired worker’s payments would be reduced by $523.53 each month, or $6,283, if this payout were to be reduced by 23%.
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Social Security Overhaul
GoBankingRates (via Yahoo! Finance) said Congress last overhauled Social Security in a significant way in 1983 (48 years after its official launch in 1935). Congress increased payroll taxes levied on American employees in 1983 and raised the full retirement age from 65 to 67.
Each of those two proposals are being considered as potential solutions for 2023, with some MPs advocating raising the retirement age to 70 and raising taxes. This week, President Biden is scheduled to present his budget plan, and it is very certain that financing for Social Security and Medicare will be among the topics covered.
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