Nothing Beautiful About 21% Cuts To Social Security

Forbes

01-06-2025

the real risk is doing nothing is not only an inspirational reminder to not procrastinate it is a ... More political strategy for those who want to cut Social Security.
In first 200 days into President Trump's second administration, Social Security is under both overt and covert attack. Though there are no dramatic cuts to Social Security being proposed, don't be fooled – doing nothing is doing something bad.
Here's what people are asking, and what they need to know.
Social Security is the foundation of retirement income for a majority of older Americans. Nearly 90% of people over 65 receive benefits, and for 40% of them, it accounts for more than half of their income. For about 1 in 7, it provides over 90% of what they live on.
Social Security has never missed a payment in its 90-year history. Yet many retirees today are living on the edge. The median benefit—about $1,976 per month—is simply not enough to cover basic expenses in many parts of the country.
Older women are especially vulnerable. Because they tend to earn less, live longer, and have fewer retirement savings, Social Security is often their only source of income. Without it, elder poverty in the United States—already the highest among G7 countries—would be much worse.
The primary challenge is not demographic. Yes, more people are retiring than ever before—over 60 million Americans now receive Social Security retirement benefits, up from about 32 million in 1983—but we knew this would happen. Back in 1983, Congress believed it had adequately funded the program to prepare for the aging Baby Boomer population.
What lawmakers did not anticipate was that wage growth would be concentrated at the top, above the Social Security payroll tax cap. As a result, most earnings growth escaped Social Security taxation. Meanwhile, more wages stagnated and a growing share went to cover health insurance—income that is also exempt from Social Security taxes. Wage stagnation, periods of unemployment, and the rise of under-the-table and gig work, where neither employers nor workers contribute to Social Security, have all reduced revenue flowing into the system. That's why the program is now paying out more than it collects.
Since 2010, annual costs have exceeded tax income. The system has survived by drawing down the Trust Fund—but that fund is running out. By 2033, unless Congress acts, Social Security will only be able to pay 79% of promised benefits.
This isn't a forecast anymore—it's a countdown. A 21% across-the-board cut would hit everyone – about $16,500 cut in annual benefits for a typical dual-income couple – regardless of income.
Future retirees—especially Gen X and Millennials—face a far more precarious future because they have fewer defined benefit pensions, and are more likely to rely on volatile market-based savings like 401(k)s. But a 401(k) is better than nothing and 50% of U.S. workers at any one point in time have nothing – their employers don't have retirement plans. And while stocks and housing markets have grown, these gains have primarily benefited the wealthy. The median retirement savings for the bottom 50% of Americans is zero.
Meanwhile out-of-pocket healthcare and long-term care costs are projected to exceed $120,000 for the average person turning 65 today. Most retirees are not prepared to bear that burden, especially with eroding Social Security benefits and Medicaid cuts.
Older people need Medicaid and so do their family members – who would have paid if it weren't for Medicaid. Surprisingly, middle and upper income people will rely on Medicaid more and more for long-term care. Now, over 30% of 70-year-old singles in the bottom third of the income distribution receive Medicaid as does over 10% of singles in the top third if they survive into their 90s. And, middle - income folks who spend at least two years in a nursing home are nine times more likely to be on Medicaid than those who are not.
According to PolicyLink and the Urban Institute, the median present value of lifetime Social Security benefits for Gen Z is $410,000 ($439,900 for white non-Hispanic, $359,800 for Hispanic, and $332,700 for Blacks). Research from The New School shows that among near-retirees, Social Security wealth is $188,300 for the bottom 50%, (vital because they have no retirement savings or home equity. For the middle 40%, Social Security wealth is $300,500, worth more than the $200,000 in their retirement accounts and $128,000 in home equity.
There's no mystery here. The solution is revenue. One of the most effective and popular reforms would be to lift or eliminate the cap on earnings subject to the payroll tax. Right now, people stop paying into Social Security once they earn above $168,600. In effect, a millionaire pays a smaller share of their income into Social Security than a middle-class teacher or nurse.
Raising revenue solutions are included in the proposed Social Security 2100 Act including:
To help people save for retirement we need to creating an automatic, public supplemental retirement account to ease pressure on families hoping to live on Social Security alone. The Retirement Savings for Americans Act debated by Congress now would do that.
Because inaction is the strategy.
The current administration and its allies in Congress are choosing to 'do nothing'—a deeply political choice that ensures Social Security will hit the wall by 2033. That is not passive. That is deliberate negligence. A benefit cut of 21% isn't hypothetical—it's already written into law if Congress fails to act.
Moreover, Trump's 'no tax on tips' proposal in the"One Big Beautiful Bill" sounds generous to workers but it would significantly reduce Social Security's revenue by about $30 billion and accelerate its insolvency to as soon as 2032, according to the Committee for a Responsible Federal Budget.
And there's more: 1) layoffs of 7,000 SSA workers, closure of offices, 'fraud crackdowns' that deny people access to benefits, and 2) the elimination of evaluation and independent research – on Feb. 21, 2025 D.O.G.E cut the Research and Disability Research Centers at 6 Universities – on Social Security could lead to self-dealing, politicization and inefficiency. These efforts erode the public's trust and the agency's ability to serve its mission. A letter requesting RDRCs to be reinstated from respected academics and groups advocating for the aged was sent to Republican and Democratic lawmakers – Susan Collins, Patty Murray, Tom Cole and Rose DeLauro in March.
If nothing changes, benefits will be cut by 21% in less than a decade. For a median retiree, that's a loss of about $414 a month.
That's not just a policy failure. It's a betrayal of a promise. Americans paid into Social Security with every paycheck they earned. To renege now is not fiscal prudence—it's political cowardice.
As I've said before: enemies of Social Security don't need to pass a bill to kill it. They just need to run out the clock. Every day of inaction is an act of aggression against the system that protects our elders from poverty and indignity.
It's time to stop pretending that nothing is happening to Social Security.
Social Security card sinking underwater in stormy seas as concept for issues around funding of USA ... More pensions to seniors