A 7% Social Security Benefit Cut Could Be Just 6 Years Away. What You Need to Know

The average Social Security check sits at a record high, but most seniors still aren't happy with what they're getting. Many believe that the program needs larger cost-of-living adjustments (COLAs) to help checks better keep pace with inflation, with nearly one-third of seniors asking for a benefit boost of 10% or more, according to The Motley Fool's recent research on beneficiaries' attitudes toward the latest COLA.

Unfortunately, benefits might start moving in the wrong direction very soon. A recent Congressional Budget Office (CBO) report reveals that we're just six years away from a 7% benefit cut, with even greater cuts looming on the horizon. Here's what that means for you if you're on Social Security or hope to claim checks someday.

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Why Social Security is facing cuts

Changing demographics have caused Social Security to spend more than it's earned for several years now. The number of Social Security beneficiaries increased rapidly as baby boomers began applying, and the generations that followed are smaller, leaving fewer workers to pay into the program.

Social Security payroll taxes and benefit taxes on seniors aren't enough to cover all the program's expenses. So far, the government has avoided cuts by relying on the money in the program's trust funds, but those funds are running low.

They're expected to be depleted in 2032, according to a recent CBO report. At that time, the Social Security Administration would have to reduce benefits by 7%. This cut would jump to an average of 28% per year between 2033 and 2036.

Recent legislative changes, such as the Social Security Fairness Act, which raised benefits for certain seniors, and President Donald Trump's new senior tax deduction, have exacerbated the problem by increasing the program's expenses and reducing its income, respectively. But we still haven't seen the full effects of these changes.

Social Security changes are coming

While Social Security benefit cuts remain a possibility, they're not a guarantee. The government may decide to increase the program's funding so that it can pay out all scheduled benefits for decades to come.

The downside to this approach is that it'll likely require raising taxes on at least some people. This could be workers, seniors, or both. It's likely a big part of why the government has been reluctant to make any major Social Security changes, despite the rapidly dwindling trust funds.

We don't know what the final plan will look like, but we can be sure that the less reliant you are on Social Security in retirement, the better off you'll be. Focus on building your own retirement savings, and keep an eye out for future changes to Social Security. Once we know how benefits and taxes could change, then it'll be time to revise your retirement plan.

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