Older Americans may stay in the workforce for longer as Social Security is predicted to become insolvent in just 10 years, experts say.
If nothing changes, Social Security will face a 23 percent across-the-board benefit cut in 2033, according to the Committee for a Responsible Federal Budget. For an average newly retired couple, that means $17,400 less.
A single-income couple, meanwhile, would have $13,100 less in benefits, on average.
Many 2024 presidential candidates are dealing with pressure to keep Social Security the same, but as the committee outlines, this means Americans would face more than 20 percent less in benefits when it comes down to retirement in just a decade from now.
In effect, those who are 57 years old today will experience the cuts at normal retirement age if Social Security remains the same.
By income level, couples and individuals would experience slightly different rates of benefit cuts. This is because Social Security works by paying out a portion of retirement benefits based on taxes taken from your payroll. Those who earn more, therefore, are promised more money when retirement comes around.
In 2023, employers and employees pay 6.2 percent toward Social Security, and up to $160,200 of employee's incomes is subject to the program's tax.
That means while low-income, dual-income couples would see a $10,600 cut, a high-income couple could see their benefits slashed by a whopping $23,000.
While the low-income couple would see less taken away from this, it represents a larger part of their income, meaning many seniors could fall into poverty if they are unable to keep working, the committee found.
"Although the cut for a low-income couple would be smaller, it would represent a larger share of their income – and so senior poverty would rise significantly upon insolvency," the CFRB said.
Seniors Working Longer
To combat the risk of potential poverty, it's likely many seniors will choose to work longer.
Social Security is the main source of income for Americans aged 65 and older, so any cut could have dire effects on seniors' budgets and ability to retire at 65.
"Social security is not a handout, it is akin to a defined benefit plan that is managed by government, and just as PBGC protects private pensions, our lawmakers must ensure that social security does not go bankrupt," Raminder Luther, the dean of the Bertolon School of Business at Salem State University, told Newsweek.
Financial planners are increasingly seeing younger Americans concerned about what the future of Social Security looks like for them.
"We work with a relatively young clientele, and they aren't too confident today's system will be the one they inherit when they retire," Douglas Boneparth, a certified financial planner and president and founder of Bone Fide Wealth in New York, told CNBC. "They want to hedge their bets."
Already, under the current benefits program, roughly 10 percent of older adults live in poverty, according to the Center on Budget and Policy Priorities. If nothing changes and Social Security is depleted by 2033, that number would skyrocket to nearly 40 percent.
"The old-age poverty rate would soar if Social Security benefits were cut," Richard Johnson, a senior fellow at the Urban Institute, told CNBC. "Millions of seniors would be unable to afford basic needs, like food, shelter and health care. Many seniors would have to turn to their children for financial help."
The financial strain on seniors' children would also likely have long-standing impacts on their own generation, who also run the risk of having less Social Security than previously promised to them.
Luther told Newsweek that Americans will need to negotiate better retirement deals with their employers in the years moving forward. She also anticipates it will cause many Americans to take on part-time jobs, delay having children and make major cuts to their discretionary spending.
The reason Social Security continues to be in danger is because more Americans are retiring than ever as the Baby Boomer generation seeks out their program benefits. At the same time, Americans are living longer, causing the program to pay more out over time.
And since younger generations are smaller, there are too few workers paying into the system for the demand.
Congress has been discussing the best way to address the upcoming benefit cuts for several years. Of course, the biggest potential solutions suggested are to reduce benefits or simply delay the full retirement age, leading to seniors working just as long if not longer than they already are.
Others have suggested that increasing financial consequences for those who claim Social Security before full retirement age would work best.
David Blanchett, head of retirement research at PGIM, told CNBC last month that lawmakers will likely have a "last-second compromise" but ultimately "there are going to be losers."
While it's possible those just approaching retirement will still see full benefits, younger Americans may need to deal with the fact that their benefits will be far lower than the generations before them.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Suzanne Blake is a Newsweek reporter based in New York. Her focus is reporting on consumer and social trends, spanning ... Read more
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