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Social Security cuts: 28 states could lose $500 or more per month
If you rely on Social Security to pay your bills, a looming shortfall could cost you more than $6,000 a year, depending on where you live.
An analysis from the Committee for a Responsible Federal Budget (CRFB) shows which states could suffer the biggest cuts. Meanwhile, new AARP research suggests the program’s financial insolvency could have been postponed by decades if one simple measure was taken years ago.
With Social Security’s main trust fund expected to run out of reserves in 2032, lawmakers face mounting pressure to find a solution. But proposals have failed to gain traction in Congress.
Social Security’s retirement and survivors trust fund is projected to exhaust its reserves in late 2032, according to the 2026 Social Security trustees report.
That doesn’t mean Social Security will go bankrupt or stop paying benefits. Instead, incoming revenue from payroll taxes and other sources could only cover about 78% of scheduled retirement and survivor benefits.
Without congressional action, that translates to a potential 22% benefit reduction.
A CRFB analysis, which used a slightly higher 24% reduction based on an earlier projection, found that the average monthly benefit could get cut by more than $500 in 28 states and Washington, D.C.
Nationwide, the average cut would be $500 a month, with losses ranging from $459 in Mississippi to $556 in Connecticut. In reality, the report finds “if Social Security becomes insolvent – no state would be spared.”
The report also found that benefit reductions would impact roughly 1 in 5 Americans and result in $345 billion in lost payments annually, equivalent to 1.1% of the nation’s gross domestic product (GDP).
Connecticut tops CRFB’s rankings at $556 a month, followed by New Jersey and New Hampshire.
Here are the 10 states facing the largest average reductions under the CRFB’s hypothetical 24% cut.
Why some states face larger benefit cuts
Social Security retirement benefits are partly based on a worker’s lifetime earnings, so if you earned more, you tend to receive more in retirement.
That means people who get bigger Social Security checks would lose more money each month on a dollar-for-dollar basis, even if everyone’s benefits were cut by the same percentage.
For example, someone collecting $2,300 a month would lose $552 under a 24% cut. Someone receiving $1,900 would see a smaller $456 reduction.
But smaller dollar losses still hurt, especially in lower-income states where retirees may have less savings to cushion the blow. Mississippi has the lowest estimated monthly cut, $459, yet total benefit losses would equal 1.8% of its economy, according to the CRFB.
The estimates come with some important caveats, though.
The CRFB used Social Security beneficiary data and state economic figures from 2024 to model a hypothetical 24% benefit cut. Actual losses in 2032 would depend on changes in beneficiary demographics, benefit amounts, and economic conditions.
The latest trustees report also projects a slightly smaller funding shortfall of 22%.
The most populous states could lose the most money overall.
Under the CRFB’s scenario, annual benefit losses could be greatest in these states.
Largest total annual benefit losses
When measured as a percentage of a state’s GDP, however, a different group of states faces the biggest impact.
Maine also has the largest share of residents affected, at 22.9%, versus 17.7% nationally.
Social Security won’t stop collecting taxes or paying benefits in 2032. But its reserves are drying up.
The program is primarily funded through payroll taxes paid by workers and employers. When revenue exceeds benefit payments and other costs, the surplus is credited to Social Security’s trust funds, which hold special-issue U.S. Treasury securities.
When expenses exceed income, Social Security can redeem those securities to cover the difference.
A slate of reforms in 1983 helped build a cushion that peaked in 2020. But program costs have exceeded total income since 2021, and the retirement and survivors trust fund could exhaust its reserves by late 2032.
Incoming revenue would then cover about 78% of scheduled retirement and survivor payments.
Social Security’s separate disability trust fund remains solvent over the long term under current projections.
If the retirement and disability funds were combined, their reserves would last until 2034, at which point incoming revenue would cover about 83% of combined scheduled benefits.
AARP research highlights another cause of Social Security’s financial woes: A shrinking share of the economy is subject to payroll taxes.
In 1984, taxable payroll accounted for about 41% of U.S. GDP. By 2025, that share was just 34%.
If taxable payroll had remained at its 1984 share of GDP, Social Security would have collected an additional $10.8 trillion between 1984 and 2034, measured in inflation-adjusted 2025 dollars
That money could have kept the combinedretirement and disability funds solvent until 2059 — 25 years longer. It’s a hypothetical scenario, not a guarantee.
AARP points to rising business and investment income, automation, and business structures that allow some owners to receive profits rather than wages. Much of that income escapes Social Security payroll taxes.
That’s a major loss for a program that depends heavily on workers’ earnings — 91% of Social Security’s revenue came from payroll taxes in 2025.
One solution is to raise the payroll tax rate.
Yet, for over 35 years, the combined payroll tax rate hasn’t budged. It’s been 12.4% — split equally between employers and employees — since 1990, with an exception for a temporary payroll tax reduction in 2011 and 2012.
There’s also a ceiling on earnings subject to Social Security taxes. That limit is $184,500 in 2026 and will rise to $192,300 in 2027.
The Social Security trustees have also estimated that immediately raising the combined payroll tax rate to 16.65% — 4.25% higher, split equally between employers and employees — at the beginning of 2026 would have kept the trust funds solvent for over 75 years.
But increasing payroll taxes is just one of several options on the table for lawmakers.
Congress has several ways to shore up Social Security’s finances, including increasing taxes, changing benefit formulas, or raising the retirement age.
Each option comes with economic and political trade-offs.
Bipartisan reform is possible — it happened in 1983. Those reforms accelerated payroll tax increases, gradually increased the full retirement age from 65 to 67, and taxed some benefits.
Those changes were expected to keep the program solvent into the early 2060s. Now, trust funds are projected to exhaust their reserves nearly three decades sooner.
Where lawmakers stand now
The looming funding shortfall is prompting new bipartisan discussions in Washington, but lawmakers remain divided over how to actually close the funding gap.
The PROMISE Act would establish a process for developing and considering legislation designed to provide at least 50 years of Social Security solvency.
But so far, Congress hasn’t passed a comprehensive plan to resolve the program’s financial crisis.
Proposals on the table
Various legislation has been proposed in recent years to fix Social Security, including:
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Eliminate the payroll tax cap:Sens. Bernie Moreno, R-Ohio, and Elizabeth Warren, D-Mass., have proposed taxing all wages but haven’t introduced a bill. But the Tax Policy Centerwarns that insolvency would only be postponed.
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Tax high incomes and expand benefits:The 2026 Social Security 2100 Act from Rep. John Larson, D-Conn., and Sen. Richard Blumenthal, D-Conn., would tax more earnings above $400,000 and certain investment income while increasing benefits and revising cost-of-living adjustments.
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Use estate tax revenue:The Strengthen Social Security by Taxing Dynastic Wealth Act, introduced in March 2026 by Sen. Chris Van Hollen, D-Md., would restore federal estate, gift, and generation-skipping transfer taxes to their 2009 levels. It would raise the top estate tax rate from 40% to 45% and direct the additional funds to Social Security.
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Invest through a separate fund: For decades, Sens. Bill Cassidy, R-La., and Tim Kaine, D-Va., have proposed a roughly $1.5 trillion Treasury-financed fund invested in the stock market. Higher returns could help provide the trust funds with more revenue, but poor returns could leave taxpayers holding the bag. The proposal doesn’t solve the 2032 deadline on its own.
You shouldn’t assume a 22% cut is inevitable. Congress could act before the trust fund’s projected depletion date, and any reforms could impact current and future beneficiaries differently than expected.
But the shortfall highlights the risks of relying on Social Security completely for your retirement income.
Here are a few things you can do to prepare:
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Contribute more to retirement accounts. Boosting your savings in a tax-advantaged retirement account, such as a 401(k) or IRA, can help reduce your reliance on Social Security. If your employer offers a 401(k) match, try to contribute enough to capture the match.
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Get an updated Social Security benefit estimate:Create or log in to your my Social Security account to see how much you could receive in retirement based on your earnings history and expected claiming age. This can help you understand what a 22% cut really means for your wallet.
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Stress-test your retirement budget: Estimating how a 22% benefit reduction would actually impact your monthly expenses can help you identify any potential shortfalls ahead of time.
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There’s no across-the-board cut currently scheduled to take effect. The retirement and survivors trust fund could exhaust reserves in late 2032, but Congress could change the rules before then.
The trustees project a 22% shortfall by 2032. So if you received $2,000 a month in Social Security, you could receive about $1,560 instead, though actual reductions may differ.
Would current retirees be affected?
Without legislative changes, current retirees and survivor beneficiaries would also face reductions. Congress could protect current beneficiaries in a future deal, but that isn’t guaranteed.
