PensionBee Analysis Says Looming Social Security Cuts Could Cost Americans $138,000 Each
The analysis finds that a 23% cut would require $138,000 in added savings to replace the lost income; a 19% benefit cut would require an individual retirement beneficiary to save an extra $114,000.
Social Security benefits are on pace to be slashed sooner than expected, driven by an accelerated timeline for trust fund insolvency that would leave retirees needing up to $138,000 in additional retirement savings to maintain their standards of living, according to a PensionBee Inc. analysis obtained by PLANSPONSOR.
The analysis followed the latest Social Security Administration Board of Trustees report, which revealed the combined Social Security trust funds are now expected to have to start reducing payments to beneficiaries by 2034—one year earlier than previously forecast. The retirement-only fund, the Old-Age and Survivors Insurance Fund, meanwhile, faces depletion even sooner—in 2033. That would trigger a 23% cut to Social Security retirement benefits.
According to the board of trustees’ report, the Social Security Fairness Act—passed by Congress in late 2024 and signed on January 5 by former President Joe Biden—accelerated the depletion of the trust funds by one year.
PensionBee’s founder and CEO, Romi Savova, agrees that the bill, which extended benefits for about 3 million public sector workers—mostly teachers, firefighters, police officers and government employees—came at a cost.
“The decision was essentially Congress choosing to help current retirees, but of course, that may come at the expense of the system’s long-term health,” Savova says.
Social Security’s trust funds have been depleting since 2021, and without congressional action, benefits will have to be cut at some point.
According to PensionBee’s analysis, a 19% benefit cut would require an individual retirement beneficiary to save an extra $114,000, while a 23% cut would require $138,000 in added savings to replace the lost income, based on the widely used 4% retirement withdrawal rule. That is significantly more than the current median U.S. retirement account balance of $87,000, the report stated.
“The accelerated insolvency timeline means Americans have even less time to prepare for what’s coming,” Savova said in a statement accompanying the unreleased analysis. “While we cannot control Congressional action, we can control our response. Americans who consolidate their retirement accounts and take control of their savings today may be far better positioned to weather potential future cuts than those who wait for political solutions.”
Specifically, if benefits for a 55-year-old were cut 23%, PensionBee’s analysis estimated that individual would need to save an additional $100,992 to offset the reductions over the 12 years until they could claim a full Social Security benefit at age 67; a 19% cut would require $83,436 in additional savings.
For example, the youngest cohort in the analysis—25-year-olds—would need to save an additional $40,614 if benefits are cut 23% and $33,558 if benefits are cut by 19%.
PensionBee’s report recommended five immediate steps to mitigate the potential impact:
- Maximize contributions, especially catch-up contributions for those older than 50;
- Take advantage of employer matches and automatic escalation tools;
- Consolidate retirement accounts to reduce fees and streamline oversight;
- Diversify investments to manage risk; and
- Delay retirement to increase benefit payouts.
“Social Security isn’t a bonus,” the report stated. “For most Americans, it’s the foundation of retirement. But that foundation is cracking, and the stakes couldn’t be higher.”