If Congress doesn't act, dual-income couples could see their Social Security benefits slashed by up to $16,500 annually starting in 2033

Social Security is inching closer to a financial crisis that could result in significant benefit cuts for 70 million Americans. A recent analysis from the Committee for a Responsible Federal Budget (CRFB) estimates that a typical couple could see their annual benefits reduced by $16,500 in 2033.

For a middle-income single worker, the cuts would amount to about $8,200 per year, according to the CRFB, a nonpartisan organization focused on fiscal issues. The analysis assumes no action is taken to fix Social Security before its trust fund becomes insolvent in 2033.

The main source of Social Security benefits, the Old-Age and Survivors Insurance (OASI) Trust Fund, holds $2.6 trillion. However, Social Security is currently paying out more in benefits than it receives in taxes, partly due to the large number of baby boomers retiring. As a result, the agency is drawing from the trust fund to meet its obligations.

Without changes, the trust fund is projected to be depleted by 2033. This would trigger an automatic 21% reduction in benefits for all recipients, regardless of income or marital status, according to the CRFB analysis. Such cuts could severely impact retirees, with 40% of seniors relying solely on Social Security for their income, which averages $1,907 per month.

"This would likely lead to a spike in poverty rates for older Americans," said Shannon Benton, executive director of the Senior Citizens League. Lower-income retirees, who are less likely to have saved for retirement, would be particularly affected.

Delaying reforms to Social Security could further destabilize the program, noted Chris Towner, policy director at the CRFB. "There's a cost to waiting," he said. "Right now, the program could be fixed with a 27% tax increase or a 21% benefit cut. If we wait, those numbers will only grow."

Despite the looming challenges, many Americans misunderstand what insolvency would mean. According to a Gallup poll, 8 in 10 adults worry Social Security "won't be available" when they retire. However, Nancy Altman, president of Social Security Works, assures that the program will continue to exist. Even if the trust fund is depleted, payroll taxes will still cover about 79% of promised benefits.

"There’s a lot of misinformation," Altman said. "Social Security won’t disappear. The real issue is that Congress needs to act to avoid the cuts."

If no action is taken, beneficiaries would still receive payments, but they would amount to 79% of the full benefits. For example, a middle-income worker earning around $63,400 annually would see their monthly payment drop from $3,275 before insolvency to about $2,592 afterward, resulting in an annual loss of $8,200.