Fidelity Says a Social Security Cut Could Drain $161,000 From a $500K Portfolio - Here’s How To Prepare

The impending cuts to Social Security could start having an outsized impact on your retirement plan. The 2026 Social Security Trustees Report projects that the retirement trust fund will run out of reserves in the fourth quarter of 2032. That's one quarter earlier than last year's estimate.

After that, payroll taxes and other incoming revenue would cover about 78% of scheduled retirement and survivor benefits. The law doesn't allow the program to pay more than it takes in, so checks would shrink by about 22% unless Congress acts. For retirees who would cover that gap from savings, the cut could make it harder to avoid running out of money in retirement.

Here's what Fidelity estimated the cost for one hypothetical couple will be, and what steps you can take to mitigate the damage to your portfolio.

How Fidelity calculated the $161,000 portfolio gap

Social Security's average retired-worker benefit is $2,071 a month in 2026. A couple who both collect that amount would get $49,704 a year, and a 22% cut would reduce it by about $10,935.

Fidelity's October 2026 analysis assumes roughly $2,000 per person instead, for a $10,560 annual loss. Its hypothetical couple relies on a $500,000 portfolio as its only other income source. Covering the shortfall means withdrawing about 2% more from that portfolio each year than planned.

Fidelity assumes a steady 7% annual return and raises the extra withdrawal 2.5% a year for inflation. After 10 years, the portfolio grows to $983,576 without the cut but only $822,344 with it, a gap of $161,232.

About $118,000 of that gap is the extra money withdrawn. The other roughly $43,000 is growth those dollars would have earned if they'd stayed invested.

Fidelity explained that the example is only an illustration, and it excluded the couple's regular retirement withdrawals. Actual results would depend on returns, inflation, withdrawal timing, and how long the money has to last.

How much a benefit cut would cost retirees in each state

A June 2026 analysis from the Committee for a Responsible Federal Budget found that a 24% cut would reduce today's Social Security retirement benefits by about $345 billion a year. The group notes the Trustees have since lowered their estimate to about 22%.

Under the 24% scenario, the average monthly cut would be $500 nationally and top $500 in 29 states. Retirees in Connecticut would lose the most, at $556 a month, followed by New Jersey ($554), New Hampshire ($553), Delaware ($549), and Maryland ($541).

Those are statewide averages, so your own cut would depend on your scheduled benefit.

Why delaying Social Security to 70 could offset part of a cut

Waiting until 70 permanently raises your monthly benefit, and that could make up a big chunk of the loss in potential monthly payments. Social Security adds delayed retirement credits of 8% a year after full retirement age for anyone born in 1943 or later.

With a full retirement age of 67, waiting until 70 adds 24%. A $2,000 monthly benefit at 67 would become $2,480 at 70. After a 22% cut, those checks would drop to $1,560 taken at 67 and about $1,934 taken at 70.

Even after the cut, the age-70 check would be only about $66 less than the uncut $2,000 benefit at 67. Waiting also means skipping three years of checks, so it works best if you're healthy and you would be able to pay your bills until 70.

How catch-up contributions help workers in their 60s

Pre-retirees still drawing a paycheck have time to save more before any cut. Under 2026 IRS limits, employees may contribute up to $24,500 to a 401(k) or similar workplace plan. Workers 50 and older get an extra $8,000 catch-up contribution.

Workers ages 60 through 63 qualify for a larger $11,250 catch-up instead, for a potential total of $35,750 a year. IRA savers 50 and older may add $1,100 on top of the regular $7,500 limit.

A bigger balance also lowers the withdrawal rate needed to cover a cut. On a $600,000 portfolio, Fidelity's $10,560 shortfall would be about 1.8% of the balance instead of 2.1%.

How guaranteed income could cover essential bills

Turning part of your savings into guaranteed payments could make your budget less dependent on Social Security. Fidelity points to income annuities, which convert a lump sum into a predictable stream of income for essential expenses.

An immediate income annuity starts paying right away, while a deferred income annuity begins at a future date you choose. Some immediate annuities offer annual payment increases to help keep pace with inflation.

The guarantees depend on the insurer's ability to pay. Deferred income annuities are irrevocable and have no cash surrender value, so compare costs and terms before committing savings.

Why planning for no Social Security is also a mistake

A 22% cut still leaves most of the check. For Fidelity's couple, planning for zero would mean replacing about $48,000 a year from savings instead of $10,560.

"Monthly checks will not go away," Fidelity's Maura Clow said in an October 2026 Fidelity Viewpoints video. Asked whether younger workers should assume Social Security won't be there for them, she said no. She said Congress has historically made sure benefits were paid.

Lawmakers from both parties introduced bills in 2026 to change how a fix gets created. The House's Bipartisan Social Security Commission Act, from Reps. Tom Cole and Tom Suozzi, would create a commission focused on long-term solvency. The Senate's PROMISE Act would have the Social Security Advisory Board draft a bill to keep the trust funds funded for at least 50 years. It also sets rules for bringing that bill to a vote.

Bottom line

Fidelity's $161,000 figure shows what covering a cut from savings could cost one hypothetical couple over 10 years. It isn't a forecast, and Congress has about six years to act before the retirement trust fund's reserves run out.

Morningstar's research puts the highest safe starting withdrawal rate for new retirees at 3.9% over 30 years. Covering Fidelity's extra 2% on top of that would push withdrawals to about 6%. Rerun your withdrawal plan with your Social Security estimate cut 22% and a market drop early in retirement. If it only works with full benefits, there's still time to make the right moves and save more or delay your claim.

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