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

The average Social Security benefit is about $2,089 per month. For the typical senior, that adds up to a little more than $25,000 a year. After the next cost-of-living adjustment (COLA) takes effect, that amount is expected to rise by 3.6%.

A 23% reduction would bring a $2,089 monthly benefit down to about $1,609. That would amount to a loss of $5,760 a year, a painful hit for retirees who depend heavily on their Social Security income.

Your own loss could be higher or lower depending on how your benefit compares with the average, but the impact would likely still be serious for your household budget. If such a cut ever happened, you would need to replace the missing income with savings, work, or other government assistance. For now, though, that is not the most likely result.

A 23% benefit cut is not the likeliest outcome

While Social Security cuts cannot be ruled out entirely, it is unlikely that checks will be allowed to fall by nearly one-quarter. Such a move would be extremely unpopular, and past funding problems have usually been met with action from Congress to shore up the program.

A similar response will probably happen again, even if lawmakers take a few more years to reach it. Several proposals have been discussed in Washington, D.C., but none has gained real momentum. That is because every possible solution creates costs for someone.

One option would be to raise the Social Security payroll tax rate to bring in more money. That could help avoid a benefit cut, but it would also leave workers with less take-home pay for their current needs.

In the meantime, the best course is to keep saving for retirement and manage spending carefully so savings last as long as possible. When policymakers eventually settle on a change to Social Security, retirees and workers alike may need to revisit their retirement plans and make adjustments.