Millions of Americans could see their Social Security checks reduced by about $500 per month within the next seven years if lawmakers fail to address the program’s looming funding shortfall, according to a new analysis from the Committee for a Responsible Federal Budget (CRFB).
The group’s report warns that Social Security’s retirement trust fund is projected to run out of reserves in 2032. Under current law, the program, which pays out benefits to more than 70 million Americans nationwide, would then be unable to pay full scheduled benefits, triggering an automatic reduction estimated at 24 percent across all recipients.
The problem is longstanding, with numerous lawmakers in Congress putting forward proposals to save Social Security from insolvency.
Such a cut would affect retirees nationwide and could also ripple through state economies that rely heavily on Social Security income, the report found.
$500 Average Cut
CRFB estimates that if a 24 percent reduction were imposed today, the average Social Security beneficiary would lose about $500 per month.
The impact would vary by state, with projected monthly reductions ranging from $459 to $556. Retirees in Connecticut, Delaware, Maryland, New Hampshire and New Jersey would face some of the largest monthly losses, while benefit cuts would exceed $500 in 29 states.
Nationally, the average reduction would amount to more than what the typical retired household spends on groceries in a month, according to the report.
The analysis also found that roughly one in five Americans, about 63 million people, would be affected. That figure includes 54 million retired workers as well as 9 million survivors and dependents who receive benefits through the program. In every state, at least 10 percent of residents would be impacted. The largest shares of affected populations would be found in Maine, West Virginia, Vermont, Delaware, Montana and New Hampshire.
“No state would be spared from the potentially devastating effects of insolvency,” the report said.
Why Social Security Faces a Shortfall
Social Security is one of the federal government’s largest programs and serves as a primary source of retirement income for tens of millions of Americans.
The program is financed primarily through payroll taxes paid by workers and employers. For many years, Social Security has collected more revenue than it paid out, allowing trust fund reserves to accumulate.
Demographic changes have altered that balance. Americans are living longer, birth rates have declined and a growing number of baby boomers have entered retirement. As a result, Social Security is now paying out more in benefits than it receives in tax revenue. In the last decade, the number of recipients receiving retirement, dependent and survivor benefits has climbed from around 50.2 million in 2016, to 62.2 million in 2026.
According to CRFB, the retirement program’s costs have exceeded its cash income for the past 16 years, requiring the use of trust fund reserves to cover the gap. The organization said that policymakers have known for more than four decades that the program would eventually face insolvency if changes were not made.
It’s important to note that insolvency would not mean Social Security payments disappear altogether. Payroll taxes would continue to generate revenue, allowing the program to pay most scheduled benefits. However, incoming revenue would only be sufficient to cover roughly three-quarters to four-fifths of promised payments, potentially resulting in automatic reductions if Congress does not act.
Economic Consequences Beyond Retirees
The report also argues that the effects of benefit reductions would extend beyond recipients themselves. CRFB estimates that a 24 percent nationwide cut would reduce Social Security payments by $345 billion in a single year, equivalent to 1.1 percent of gross domestic product.
In 40 states, the economic impact would exceed 1 percent of state GDP. West Virginia, Mississippi and Vermont would face the largest proportional losses. The states projected to be most affected tend to have older populations and lower incomes, making them more dependent on Social Security payments.
Measured in total dollars, larger states would experience the greatest overall losses. California would see an estimated $33 billion reduction in benefits, followed by Florida at $27 billion, Texas at $24 billion, New York at $20 billion and Pennsylvania at $16 billion.
Competing Plans to Address Solvency
Lawmakers from both parties have introduced proposals aimed at strengthening Social Security’s finances, though there are several different approaches being tabled.
One Democratic-backed proposal, the Social Security Expansion Act, was introduced in 2025 by Senator Bernie Sanders and Representative Val Hoyle. The legislation would increase benefits while applying payroll taxes to income above $250,000. It would also establish a higher minimum benefit for lower-income workers and use a senior-focused measure of inflation when calculating annual cost-of-living adjustments.
Another Democratic proposal, the Fair Share Act, would require taxpayers earning more than $400,000 annually to pay Social Security taxes on all wage, self-employment and investment income above that threshold.
Meanwhile, in 2025 Republican Senator Bill Cassidy and Democratic Senator Tim Kaine introduced a bipartisan plan that would establish a separate investment fund designed to generate returns through investments in stocks, bonds and other assets. The proposal calls for an initial government investment of $1.5 trillion, with the fund intended to supplement payroll tax revenue over time.
Another option that has been proposed is raising the full retirement age. The Republican Study Committee’s fiscal year 2025 budget plan called for gradually increasing the retirement age from 67 to 69 for younger workers.
Representative Gus Bilirakis, a Republican, has also recently reintroduced legislation that would create an independent bipartisan commission tasked with examining the long-term finances of Social Security and Medicare and recommending potential solutions.
“By bringing together experts from across the political spectrum, we can remove partisan politics from the conversation and focus on practical, responsible solutions,” Bilirakis said.
Referencing reforms enacted more than 40 years ago, when Social Security was facing another funding cliff, he added: “We have done this before. In the early 1980s, President Ronald Reagan and Speaker Tip O’Neill worked across party lines to preserve Social Security through a similar commission process. Their efforts succeeded because they put the American people ahead of politics. I believe we can do so again.”
