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Here's how much cutting Social Security could cost seniors

Mediafeed Logo By Derek Silva of Mediafeed | Slide 1 of 57: Social Security is a federal program that pays retired workers a monthly benefit. Benefits may also go to people with disabilities, widows, or the children of Social Security recipients, though 76% of all payments go to retired workers. Social Security benefit payments are funded through the payroll taxes that employers withhold from their workers’ paychecks.Based on the latest Census Bureau data, almost one third of U.S. households received Social Security benefits in 2019. The exact percentage varied by state, however; West Virginia has the highest percentage of Social Security recipients, with about 42% of households receiving benefits.In most states, the income from Social Security — $1,656 per household, on average — makes up at least 40% of all retirement income. Losing Social Security either in full or in part would make it significantly more difficult for seniors to pay for daily living expenses in retirement. Based on our previous research into the cost of retirement in each state, the average retirement wouldn’t be affordable in any state if Social Security were defunded.Unfortunately, the Social Security Administration (SSA) in a 2020 report said that it expects its reserve funds to run out in 2034. At that point, Social Security payroll taxes will be the sole source of money for benefit payments and benefits will be reduced to 76% of their full value.That means that if we did nothing at all, nearly every senior would still lose out on thousands of dollars of income that they need to survive in retirement. But if the payroll tax were eliminated, as the Trump administration proposed in August in response to the COVID-19 pandemic, it could further jeopardize the already uncertain future of Social Security.In this report, we look at which states rely the most on Social Security, and how much it would cost seniors in these states if Social Security were lost. We conclude that if nothing is done to save and bolster Social Security, then seniors around the country will find it difficult if not impossible to pay for their expenses in retirement.

Social Security can act as a lifeline for seniors

Social Security is a federal program that pays retired workers a monthly benefit. Benefits may also go to people with disabilities, widows, or the children of Social Security recipients, though 76% of all payments go to retired workers. Social Security benefit payments are funded through the payroll taxes that employers withhold from their workers’ paychecks.

Based on the latest Census Bureau data, almost one third of U.S. households received Social Security benefits in 2019. The exact percentage varied by state, however; West Virginia has the highest percentage of Social Security recipients, with about 42% of households receiving benefits.

In most states, the income from Social Security — $1,656 per household, on average — makes up at least 40% of all retirement income. Losing Social Security either in full or in part would make it significantly more difficult for seniors to pay for daily living expenses in retirement. Based on our previous research into the cost of retirement in each state, the average retirement wouldn’t be affordable in any state if Social Security were defunded.

Unfortunately, the Social Security Administration (SSA) in a 2020 report said that it expects its reserve funds to run out in 2034. At that point, Social Security payroll taxes will be the sole source of money for benefit payments and benefits will be reduced to 76% of their full value.

That means that if we did nothing at all, nearly every senior would still lose out on thousands of dollars of income that they need to survive in retirement. But if the payroll tax were eliminated, as the Trump administration proposed in August in response to the COVID-19 pandemic, it could further jeopardize the already uncertain future of Social Security.

In this report, we look at which states rely the most on Social Security, and how much it would cost seniors in these states if Social Security were lost. We conclude that if nothing is done to save and bolster Social Security, then seniors around the country will find it difficult if not impossible to pay for their expenses in retirement.

© Halfpoint / iStock

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