Millions of Americans who rely on Social Security could face significant benefit reductions if the program’s retirement trust fund becomes insolvent, a scenario currently projected for the end of 2032.
According to a new analysis from the Committee for a Responsible Federal Budget (CRFB), retirees could see an immediate 24% reduction in benefits once the trust fund is depleted. The average monthly loss nationwide would be about $500 per beneficiary.
Social Security’s retirement program currently provides benefits to 63 million Americans, including retirees, spouses, dependents, and survivors. For the past 16 years, the program has spent more money than it has received in cash income, relying on trust fund reserves to cover the difference.
If the trust fund runs out in 2032, Social Security would still collect payroll tax revenue, but benefits could only be paid at a reduced level unless Congress acts to strengthen the program’s finances.
List of States Facing the Largest Benefit Losses
The CRFB estimates that average monthly benefit reductions would range from $459 to $556 across the country.
States projected to face the largest average monthly losses include:
Connecticut: $556
New Jersey: $554
New Hampshire: $553
Delaware: $549
Maryland: $541
Washington: $531
Minnesota: $530
Massachusetts: $527
Michigan: $523
Utah: $523
In 29 states, the average monthly reduction would exceed $500.
The report also found that more than 15% of residents would be directly affected in 47 states. Nationally, about one in five Americans would feel the impact of a 24% benefit cut.
States with the largest share of residents affected include Delaware, Maine, Michigan, Montana, New Hampshire, Pennsylvania, South Carolina, Vermont, West Virginia, and Wisconsin.
According to the analysis, the economic consequences could be substantial. A 24% reduction would lower Social Security benefits by approximately $345 billion nationwide in a single year, equivalent to about 1.1% of U.S. GDP.
In 40 states, the economic impact would exceed 1% of state GDP. West Virginia would face the largest effect, with lost benefits equal to 1.9% of GDP, followed by Mississippi and Vermont at 1.8%.
In total dollar terms, California would experience the largest annual reduction in benefits at roughly $33 billion, followed by Florida at $27 billion, Texas at $24 billion, New York at $20 billion, and Pennsylvania at $16 billion.
The CRFB warned that no state would escape the effects of Social Security insolvency and urged policymakers to act before the projected 2032 depletion date. The organization said lawmakers have several options to restore the program’s finances, including proposals such as eliminating the payroll tax income cap, but stressed that action is needed to prevent across-the-board benefit cuts.