In recent months, financial experts, lawmakers, and the Social Security Administration have discussed how the eventual lack of funds in ten years will affect Social Security checks for all beneficiaries, particularly retired workers in the United States. How Americans will live in their later years is a major concern. While some people are preparing for retirement and some have employer retirement plans, the majority will rely on Social Security checks. However, there is a hidden danger that the money supporting government initiatives will run out sooner rather than later. Nearly 16.5 million adults age 65 and older rely on Social Security to make ends meet, according to a report by the Center on Budget and Policy Priorities.
According to a Gallup poll, 90% of retirees rely on their pensions to cover some of their monthly expenses. Social Security’s reliance on trust funds and assets could run out within the next decade, raising concerns for the next generation of seniors. Within nine years, the federal retirement system would face a $23 trillion shortfall, according to annual reports from the Social Security Board of Trustees. As worrisome as that sounds, it does not mean the trust funds will fail. While Social Security will continue to operate, it will have to drastically reduce pensions beginning in 2033 to maintain payments for many years to come.
Social Security checks for retirees are expected to become effective in 10 years
The depletion of the Old-Age and Survivors Insurance Trust Fund (OASDI) is due in part to demographic shifts and a failed fiscal strategy. 5.8 million living beneficiaries and 51 million retired persons are paid out of this trust fund. For this reason, to maintain Social Security Disability Insurance (SSDI) until 2098, when it expires, the government would have to cut pensions by as much as 21%. In 2024, a retired worker’s monthly pension is $1,918.28.
However, according to experts, this payment amount can increase next year somewhere around 2.6% due to the cost-of-living adjustment (COLA) increase, but this percentage will only be confirmed at the end of the year in October. To understand more about how this annual increase can impact your Social Security checks, please read below how much your monthly Social Security checks increase if the 2.6% increase becomes effective. Likewise, bear in mind that there are different payment amounts for each Social Security program
On the other hand, a 21% decrease would mean a $507.53 deduction from each monthly check, leaving the employee with $1,909.26. This amount is even less than what a pension would be in 2024, as can be shown.
Possible solutions to avoid cuts in Social Security checks rely on a bipartisan agreement
Legislators are responsible for solving the problem, but doing so will not be easy and, worse, will require bipartisan support. The Senate must vote 60 times to approve any changes to Social Security legislation, but the main problem is that the parts cannot agree. In addition to raising taxes on the wealthy, Democrats want to tax salaries over $168,000 a year that are now exempt from payroll taxes. Republicans want to make workers pay into the Old-Age, Survivors, and Disability Insurance (OASDI) program and similar funds longer by delaying the current full retirement age of 67. There is little agreement among lawmakers, and neither strategy offers a perfect solution. Moreover, while politicians bicker, the best course of action is to maximize your retirement savings and thus your Social Security checks.