What a 22% Social Security Cut Could Mean for the Typical Monthly Check

Millions of retirees depend on Social Security as their only source of income, and an approaching trust fund shortfall could put that support at risk. Here’s what a possible benefit cut could mean for your monthly income and how to start building a financial buffer.

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Many older Americans would struggle to pay their bills without Social Security. For those households, even a modest reduction in benefits could be devastating.

In a recent report, the Social Security Trustees said the Old-Age and Survivors Insurance Trust Fund, or OASI, is projected to pay scheduled benefits only through the fourth quarter of 2032.

After that fund runs out, Social Security would still collect payroll taxes and continue paying benefits. But without the trust fund reserves, payments could be reduced by 22% because projected revenue would cover only 78% of benefits.

Lawmakers have not let Social Security cut benefits in the past, but workers should still be prepared for the possibility of a 22% reduction.

What a 22% cut could mean for the average benefit

The average monthly Social Security benefit is about $2,086. A 22% reduction would cut that check by nearly $459 a month, lowering the average payment to about $1,627.

Even now, a monthly benefit of $2,086 works out to only around $25,000 a year. For many seniors who rely solely on Social Security, losing 22% of that income could be the difference between covering basic needs and falling short on essentials.

How workers can get ready for possible benefit cuts

Social Security may never actually face broad benefit cuts, but it is still wise to prepare for that possibility. One of the best ways to protect retirement security is to build savings.

If you retire with money in an IRA or 401(k), you can use monthly withdrawals to supplement Social Security. That savings pool can also help cover unexpected costs such as home repairs or medical bills.

If you are not yet regularly contributing to a retirement account, consider these steps:

• Make a budget, using an app if helpful, so you can see where your money goes.
• Find a few expenses you can trim without seriously disrupting your routine or quality of life.
• Redirect the money you free up into retirement savings.

If you have a 401(k), contributions can often be deducted automatically once you enroll through your employer. For an IRA, set up automatic transfers so money moves into your account each month after payday.

Having a backup plan matters either way

Benefit cuts are not certain. Even if lawmakers cannot fully prevent them, the reduction may be less severe than 22%. A 10% cut, for instance, would still be painful, but it would not be nearly as damaging.

Still, it makes sense to plan for the worst and have a fallback strategy. When Social Security checks shrink, savings can help make up the difference.