What a 23% Social Security Cut Would Mean for the Typical Benefit

Key Points

• A 23% reduction in Social Security benefits would lower the average senior's annual check by more than $5,500.

• The government is expected to step in before that happens.

• No one knows yet what solution will ultimately be chosen, or who will bear the cost.

A possible 23% Social Security benefit cut is still several years away unless lawmakers act to protect the program. That sounds serious, but it can be hard to picture exactly how much it would change a retiree's budget.

Below is a closer look at what such a cut would do to the average benefit, and why the worst-case outcome probably won't come to pass.

How the average Social Security check would change

The average Social Security benefit is about $2,089 a month. That works out to a little more than $25,000 a year for the typical retiree. It is also expected to rise by 3.6% next year when the next cost-of-living adjustment takes effect.

If benefits were cut by 23%, that $2,089 monthly payment would fall to about $1,609. Over a year, that would amount to a loss of $5,760 for the average recipient, a hit that could be especially painful for seniors who depend heavily on their checks.

Your own loss could be higher or lower depending on how your benefit compares with the average. Either way, it would likely put pressure on your budget, forcing you to rely more on savings, work income, or other government assistance. Still, this is not the most likely outcome.

Why a 23% cut is unlikely

Benefit cuts cannot be completely ruled out, but it is hard to imagine Washington allowing payments to fall by nearly a quarter. Such a move would be extremely unpopular, and past experience suggests Congress would step in with additional funding if the program ran into trouble.

That is likely to happen again, although action could still be a few years off. Lawmakers have floated several ideas, but none has gained real momentum so far because every fix would impose costs on someone.

One possibility is raising the Social Security payroll tax rate to help fund the program. That would help avoid a benefit cut, but it would also leave workers with less take-home pay for their current needs.

For now, the best approach is to keep saving for retirement and manage your budget carefully so your money lasts as long as possible. Once lawmakers settle on a change to Social Security, retirees will need to revisit their plans and adjust as needed.