A new proposal from the nonpartisan Committee for a Responsible Federal Budget suggests capping annual Social Security payments at $50,000 for single retirees and $100,000 for married couples. The measure aims to address the looming budget shortfall in the Social Security system, which the Congressional Budget Office predicts will deplete the Old Age and Survivors Trust Fund by 2032.
According to the proposal, the cap would fund 20% of the funding gap and cover 60% over 75 years, saving up to $190 billion in its first decade. Approximately 1 million retirees would be affected by the change. Without action, Social Security payments could be cut by as much as 30%, based on a February report from The Urban Institute.
Several factors have contributed to the projected shortfall, including slower-than-expected income growth and a declining worker-to-retiree ratio. Nick St. George of St. George Wealth Management noted that when Social Security began, there were five workers per retiree; now there are only two or three. Fewer contributors mean less funding for benefits.
If enacted, the cap would be the first major step toward fixing the shortfall this year. A 30% cut would reduce the average monthly payment from $2,071 to around $1,450, significantly impacting retirement plans. The average retiree believes they need $823,800 saved but has less than $290,000, according to a Clever Real Estate survey.
