Without Social Security reform Americans in retirement may lose big, report says

How would you feel if you and your spouse lost $16,500 in income a year?

That's how much a typical dual-income couple is estimated to lose in Social Security benefits if they retire when the Social Security Old-Age and Survivors Insurance (OASI) trust fund is depleted in 2033, the nonprofit, nonpartisan Committee for a Responsible Federal Budget (CRFB) said in a new report Thursday. A typical single-income couple would lose $12,400, it said.

Since Social Security is currently paying out more benefits than it's collecting in payroll tax and other revenue, the program is drawing down its reserves in the OASI trust fund to cover the remaining cost of benefits. The fund only has enough reserves to cover 100% of benefits until the fund's reserves are depleted in 2033. When that happens, the law limits benefits to incoming revenue, which essentially mandates a 21% across-the-board benefit cut for the program’s 70 million beneficiaries, CRFB said.

"Former President Donald Trump and Vice President Kamala Harris have both said they would “protect” the Social Security program," CRFB said. "However, neither has put forward a plan to meaningfully do so."

Who will be the biggest losers?

Low-income, dual-income couples retiring in 2033 would lose $10,000 in benefits, compared with $21,800 for a high-income couple, CRFB said.

"Although the cut for a low-income couple would be smaller and reflect a 21% reduction in their benefits, the cut would be a larger share of their income," it noted.

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It'll get worse over time, too

If the government doesn't reform the program, the gap between revenues and benefits paid out will continue to widen, CRFB said. The 21% cut across the board in 2033 will deepen to a 31% cut by 2098, it said.

If Trump also executes his plan to stop taxing Social Security without a plan to fully replace that revenue, the program would be further hamstrung, CRFB said.

Currently, only seniors who earn less than $25,000 per year ($32,000 for married couples) of “combined income" don't pay taxes on Social Security benefits. Combined income is equal to your adjusted gross income, plus nontaxable interest from instruments like municipal bond investments, plus half of your Social Security benefit.

This year, taxation of benefits is projected to raise about $94 billion, CRFB estimated.

Trump's change would make Social Security’s retirement trust fund insolvent more thanone year earlier – in early 2032 instead of late 2033 -- and the initial 21% cut across the board would deepen to a 25% cut, CRFB said.

“Vague political promises not to touch Social Security benefits are meaningless,” said Mary Johnson, a retired analyst for the nonprofit Senior Citizens League, last month. “Voters need to be shown where the money is coming from to pay our benefits."

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and  subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.