The funds saved for the Social Security program are on track to run dry six years from now. By law, on the day the trust fund hits zero (which is currently expected in 2032), all retirees’ benefits immediately drop by more than 20 percent.
But very few prognosticators think Congress is going to actually let that happen.
The Washington Post asked 10 experts, including analysts, activists, financial planners and a former head of the Social Security Administration, for their predictions about how much benefits will be cut in the future, and for whom.
Most said current retirees won’t see any reduction in their benefits for the rest of their lives, and that those set to retire in the next five to 10 years are probably completely safe, too. But the experts disagreed on how much Social Security younger generations can expect to collect, and how exactly the country will pay for the program on an ongoing basis.
Some liberals expect full benefits to continue indefinitely
Of all the experts interviewed, Martin O’Malley, who led the Social Security Administration under President Joe Biden, expressed the most emphatic confidence that all retirees will keep getting benefits at current levels (plus annual cost-of-living increases) for decades to come.
O’Malley predicted, moreover, that the ongoing stability of the program he once led will be financed almost entirely by one major tax change: modifying the current cap on earnings that are taxed. Like many other countries, U.S. workers pay Social Security taxes on their income up to a certain amount, currently $184,500, and then no Social Security taxes on any income above that. Modifying the cap could theoretically collect large sums from very high earners.
Nancy Altman, who leads the left-leaning advocacy group Social Security Works, also predicted a future with no cut to benefits, financed mostly by tax increases on high earners.
Financial planner Bryan Strike, too, said a no-cuts future is most probable. Just in case, though, he looks at his clients’ portfolios to make sure they’d be able to support themselves if their benefits were reduced by 25 percent, including near-retirees.
No change for today’s seniors, but less money for the young
Other experts predicted some level of cuts to benefits.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said that out of several possible paths, the one she views as both preferable and at least marginally most probable is that a bipartisan commission comes up with a package of tax increases and benefit cuts that Congress then enacts, partially shielding lawmakers from the political liability of drafting the unpopular but fiscally responsible plan themselves.
She predicted the solution would involve raising the retirement age above its current level of 67 in the distant future, as well as phasing in benefit cuts so that today’s young generations are eventually affected while their parents and grandparents are not.
“You need to save for your own retirement as much as possible, because there’s no guarantee of anything,” MacGuineas said. “The risk that it will be very different grows the younger you are. But those young people might not like the bargain they’re getting — paying extra in, for lower levels of benefits. That might not strike them as such a fair deal.”
Andrew Biggs, an expert at the American Enterprise Institute who worked on Social Security under President George W. Bush, said it’s very unlikely that benefits will be maintained at current levels forever. “Social Security reform is about breaking a promise. We promised you that if you paid taxes based on this formula, you’d get benefits based on that formula.”
He predicted a moderate increase in taxes, mostly but not entirely paid by high earners, paired with a modest cut in benefits, possibly affecting those who are currently in their 50s and younger. “The benefit cuts won’t be large, but they’re going to happen.”
Some are budgeting for 25 percent cuts
Financial adviser Abbie Gibson makes plans for her clients that show people who are currently in their early 40s or younger eventually receiving 25 percent less in Social Security each month than current beneficiaries. If the trust fund were to run dry, as is predicted to happen in 2032, the program would have enough money coming in each month from current workers to keep paying benefits at about that rate.
Gibson predicted that Congress would borrow money or raise taxes to cover people who are currently within a decade or two of retirement, but eventually that would become too costly. “For people in their 50s,” she said, “we just kind of reassure them that that’s not something you’re going to see. That’s going to be something that if it were to happen, it’s going to be for those who are younger.”
Her clients have asked her if they should retire early — under current law, recipients can wait for full retirement at 67 or can retire as young as 62 for a lesser monthly check — just so that they make sure they start getting benefits before the program gets cut.
“They’re so concerned Social Security is going away,” Gibson said.
She tells them it would be mathematically senseless to retire early for that reason, though. “If you’re claiming at 62, you’re locking in a permanent 30 percent reduction,” she noted, which would be a bigger cut than she’d expect to see the government make.
Financial planner Joel Cundick, on the other hand, said claiming early to lock in benefits isn’t necessarily a bad call.
Cundick was among the few experts interviewed who viewed any sort of cuts to current retirees’ benefits as a serious possibility. He predicted that Congress might be willing to impose means-testing and reduce benefits for seniors who have substantial income otherwise and aren’t relying on Social Security to get by.
He advises his wealthy clients, the ones who don’t need their Social Security checks, that their benefits could be reduced after 2032. “They would be absolutely fine, although they get just as frustrated as everybody else for some reason.”
For those high earners, he said, “We’re tilting toward taking the benefit a little bit sooner than we would have five to 10 years ago … to get the most benefits out of the system before the system makes any kind of change.”
The younger the client, the more pessimistic he is about their future benefits. “The 30-year-old, I’m still believing, is going to have a meaningful amount of Social Secuirty paid to them in retirement. Maybe I discount it 20 percent, especially if they’re high earners,” Cundick said. “It’s those who are in their teens and younger that we have no idea what it would be. And certainly the math is not in our favor.”
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