WASHINGTON — Retirees in 15 states could see their Social Security checks cut by more than $515 a month if the program’s retirement trust fund runs out of money in 2032, according to new state-level estimates.
The analysis, based on data from the Committee for a Responsible Federal Budget and the Social Security Administration’s trustees report, maps the fallout from an automatic cut of about 22 percent that would take effect once the Old-Age and Survivors Insurance trust fund exhausts its reserves in the fourth quarter of 2032. Payroll taxes alone would then cover only about 78 percent of scheduled benefits.
Connecticut retirees face the largest average monthly reduction, at $556, followed by New Jersey and New Hampshire at $554 each, Delaware at $549 and Maryland at $541. Washington, Minnesota, Massachusetts, Michigan, Utah, Virginia, Kansas, Pennsylvania, Rhode Island and Vermont round out the 15 hardest-hit states, with losses ranging from $516 to $531 a month.
In all, 29 states would see average monthly losses of $500 or more. The national average reduction would be around $500 a month, and the cuts would fall hardest in states where the average benefit is highest, because the same percentage cut takes more dollars from a larger check.
A separate report from the AARP Public Policy Institute puts the blame on a shrinking tax base. Wages subject to Social Security payroll taxes accounted for 41 percent of U.S. gross domestic product in 1983, but only 34 percent by 2025 — a gap the institute estimates cost the program $10.8 trillion in lost tax revenue and interest between 1984 and 2034.
Had the share of the economy subject to payroll taxes held steady at 1983 levels, the trust funds could have paid full scheduled benefits until 2059 — 25 years later than the current projection, according to AARP.
Social Security pays benefits to about 63 million Americans, including retirees, spouses and dependents. The trustees have urged Congress to act, and several bipartisan proposals would raise the $184,500 cap on wages subject to the payroll tax to help close the gap.
One point is often lost in the alarming headlines: depletion does not mean checks stop. Payroll taxes from current workers would keep paying about 78 percent of scheduled benefits. Congress has never allowed broad benefit cuts before, but there is no guarantee it will act in time this time.
