The trust fund for Social Security retirement benefits continues to face a funding shortfall and, without action, will become insolvent by 2032 — less than seven years from now. But a new report shows just how much could be shaved off your check, depending on where you live.
Social Security provides retirement benefits for 63 million people, including retirees, survivors and dependents. To put that into perspective, that’s about one in five Americans.
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But the trust fund for the retirement benefit program will run out in 2032, according to estimates from last August (updated projections will come out later this month). If nothing is done to fix the problem, benefits will have to be reduced by 24%.
Shaving a quarter off your retirement benefit check translates into an average monthly reduction of $500, according to a new report, No State Spared, from the Committee for a Responsible Federal Budget (CRFB), a nonpartisan organization that educates the public on fiscal policy issues.
No state will be spared — but some will be worse off than others. Here’s why, and what you can do about it.
Which states are most impacted?
Over the past 16 years, the cost of the retirement benefit program has exceeded the amount of money coming in from payroll taxes, requiring current benefits to be paid in part using trust fund reserves.
“By law, the Social Security retirement program cannot pay out more in benefits than it receives in revenue once its trust fund is exhausted. As a result, all retirees are projected to be subject to an immediate 24% benefit cut upon trust fund exhaustion,” according to the CRFB report.
But the report finds that benefit reductions would be even higher in 29 states, once the reduction was applied to current state-level data.
The worst off? Connecticut beneficiaries would see an average monthly benefit cut of $556. Rounding out the top five are New Jersey ($554), New Hampshire ($553), Delaware ($549) and Maryland ($541).
That’s around what the average household spends on groceries each month. Americans over the age of 65 spend on average $438 per month on food, according to the 2024 Consumer Expenditure Survey from the Bureau of Labor Statistics. Accounting for inflation, that’s $461 in 2026.
In 47 states, more than 15% of the population would be directly impacted by cuts, according to the CRFB report. The states with the highest percentage of affected residents include Maine (22.9%), West Virginia (22.4%), Vermont (22%), Delaware (21.1%) and, tied for fifth place, Montana and New Hampshire (21% each).
To put that into perspective, these cuts would exceed 1% of Gross Domestic Product (GDP) in 40 states, with the highest economic impact in Alabama, Arkansas, Idaho, Maine, Michigan, Mississippi, Montana, South Carolina, Vermont and West Virginia.
“No state would be spared from the potentially devastating effects of insolvency,” according to the CRFB report. “With less than seven years until Social Security is projected to be insolvent, policymakers need to enact changes to the program as quickly as possible to protect against these scenarios.”
That could include some potentially painful trade-offs, such as increasing payroll taxes, raising the full retirement age and/or modifying cost of living adjustments (to name a few).
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How to protect your retirement
While policymakers look for a solution, it’s a good time to focus on shoring up your retirement strategy.
Social Security was never meant to fully replace your pre-retirement earnings. Rather, it was meant to supplement your personal savings (such as IRAs), company pensions or retirement plans (such as 401(k)s), other investments and/or annuities.
In light of potential reductions in future Social Security retirement benefits, it may be prudent to bump up your personal savings rate.
Start by creating a retirement budget, which can help estimate how much you’ll need to save to live comfortably in your golden years. In general, you can expect to spend between 55% and 80% of your annual pre-retirement income each year in retirement, according to Fidelity. Of course, this will depend on factors such as your retirement lifestyle and healthcare costs.
If you’re feeling stretched thin already, you could increase your savings rate by maximizing your workplace employer match, making catch-up contributions if eligible and/or directing your tax return, work bonus or raise directly into retirement savings.
You could also delay retirement, consider part-time or gig work in early retirement or plan to downsize to a smaller home or even a less expensive city or state.
Your Social Security benefit will get a bump if you wait to claim it until full retirement age (between ages 66 to 67, depending on the year you were born), or delay it past your FRA, up until age 70.
You can claim it as early as age 62, but you’ll receive a permanently reduced benefit. At age 62, for example, your check will be 30% lower than if you waited until your FRA. On the other hand, if you wait until after your FRA, your monthly benefit will increase by 8% each year until age 70.
It could be worth sitting down with a financial planner who can model various scenarios so — whether you’re just starting out in your career or retirement is just a few years away — you can come up with a plan to meet your retirement goals.
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This article originally appeared on Moneywise.com under the title: Your Social Security check could shrink by $500 a month in less than a decade — and 29 states would get hit even harder
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.