A New Report Warns the Average Social Security Benefit Will Drop $500 a Month - Here's What to Know

Social Security benefits for seniors and other recipients are instrumental, but those benefits might decrease unless Congress takes action. In its new report, "No State Spared: Mapping the Impact of Social Security's Insolvency," the Committee for a Responsible Federal Budget (CRFB) explores just what might happen if the Social Security program becomes insolvent and how Americans who depend on the program might be affected.

Here's what you need to know about Social Security insolvency and what might happen to your benefits.

Predicting Social Security insolvency

According to the report, 63 million Americans receive Social Security benefits. That includes retirees, spouses, and dependents. For 16 years, the Social Security program's benefit payments have exceeded its income, meaning the program has been partially using its trust fund reserves to fund payments.

The Social Security Trustees predict that the retirement trust fund is going to be depleted in 2032, and the law prohibits the program from paying more in benefits than it receives if that fund is depleted. If the trust fund runs out, benefits wouldn't end entirely, but they could be immediately cut by 24%. In 29 states, the 24% cut would mean benefits would be reduced by an average of $500 per month.

Why the estimated insolvency date was moved up

Social Security is estimated to become insolvent earlier than originally thought. When the Congressional Budget Office released its 2026 Budget and Economic Outlook, it projected that Social Security would become insolvent in 2032, a full year earlier than its original estimate.

According to the CRFB, the One Big Beautiful Bill Act (OBBBA) could accelerate Social Security's insolvency. The OBBBA extends many tax cuts and increases the total standard deduction for many seniors. In turn, the OBBBA reduces the number of seniors who pay taxes on their benefits, which could reduce benefit taxation by as much as $30 billion per year. Instead of the trust fund becoming insolvent in early 2033 or late 2032, the OBBBA could speed up insolvency to late 2033 to mid 2032.

Average monthly state benefit cuts

The states may be impacted differently by a 24% Social Security cut. The report estimates that the monthly cut could range from $459 to $556, with the national average being $500. That's more than what a retired household spends on groceries each month on average; the cuts could put real financial strain on households, especially if food and housing costs continue to increase.

Certain states could see higher cuts. In Connecticut ($556), Delaware ($549), Maryland ($541), New Hampshire ($553), and New Jersey ($554), monthly cuts could exceed $500.

State impacts by population

The report indicates that 63 million Americans, or one in five citizens, could be impacted if the 24% Social Security cut were implemented today. Of those impacted, 54 million are retired workers, while 9 million are survivors and dependents.

The percentage of each state's population affected ranges from 10% to 23%. Maine could see the greatest impact by population, with 22.9% of its population impacted. Large portions of the populations of West Virginia (22.4%), Vermont (22.0%), Delaware (21.1%), and Montana (21.0%) could also be impacted.

Economic impact across states

A reduction in Social Security benefits of 24% could also have a significant economic impact. According to the report, it could amount to a $345 billion loss each year, equivalent to 1.1% of Gross Domestic Product (GDP).

That economic loss would vary by state, ranging from 0.2% to 1.9% of the state's GDP. West Virginia, Mississippi, and Vermont would face the steepest economic losses; these states have lower per-person incomes and older populations.

California could see a loss of $33 billion, while Florida's loss could reach $27 billion. Texas could lose $24 billion, and New York could lose $20 billion in benefits.

Finding the solution to insolvency

Knowing that the Social Security trust fund is projected to run out in 2032, policymakers need to act soon to identify solutions and prevent widespread cuts to all beneficiaries. Republicans and Democrats have proposed numerous solutions, such as increasing the full retirement age at which beneficiaries are able to claim full Social Security benefits.

Other potential solutions include eliminating or raising the payroll tax cap to increase the program's funding, increasing payroll tax rates to generate more income, reducing benefits for retirees with high incomes, and modifying the cost-of-living adjustment (COLA) to slow the increase in benefits that are paid out.

While there are many options, no one solution has emerged as a top choice yet, so the future of Social Security remains uncertain.

Bottom line

Congress has acted to preserve Social Security before, and there's lots of conversation around the program's future. Keep in mind that the 2032 insolvency date is a projection, not a certainty, and these estimates reflect what would happen to the program if no law or policy change were implemented.

Since no one knows just what is going to happen with Social Security, this is the time to start stress-testing your retirement income plan against a scenario where you receive reduced Social Security benefits. You could also review SSA.gov for your personalized projected benefit to see whether you may need to make adjustments to your retirement plan.