Retired American couples will face Social Security cuts of up to $21,800 a year if Congress doesn't act, watchdog says — here's how to prepare for the worst-case scenario

Arriving at the numbers

To prevent the coming Social Security crisis, Congress will need to take action. Some ways that could help may involve raising the retirement age or collecting more payroll taxes — less-than-thrilling prospects. President-elect Donald Trump has also pledged to eliminate taxes on Social Security benefits, which the CRFB believes would only expedite the cash shortfall.

When the Social Security Act of 1935 was passed, life expectancy in America was 59.9 years for men and 63.9 years for women, according to the University of California, Berkeley. Fast forward almost 90 years, and people are living longer: life expectancy is now 74.8 years for men and 80.2 years for women, according to the Centers for Disease Control and Prevention. People are living about 25% longer and are retired for many of those years.

Yet, many lawmakers have been gun shy, knowing that any tweaks to Social Security could lead to voter backlash. As far back as the 1980s, Social Security has been dubbed the “third rail” of American politics. For generations, it’s been safer, politically, to kick the funding can down the road.

The CRFB splits retirees into three income tiers: low, medium and high. If the OASI trust fund runs out in 2033, the watchdog estimates retiring single-income couples could lose $7,500 per year if they’re low income, $12,400 in the middle range and $16,300 if they have a higher income. Meanwhile, dual-income couples could lose $10,000, $16,500 and $21,800, respectively. The actual size of benefit cuts would vary across retirees depending on age, work history and lifetime incomes.

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How to prepare for potential cuts

Leaving your fate up to the whims of politicians can be a foolhardy idea. Here’s how to protect yourself in the event of a Social Security funding nightmare.

Max out your retirement plan: If your projected retirement date is 2033 or later, you’ll have about nine years to pad your 401(k) or IRA to offset any government shortfall. What’s more, starting the year you turn 50, the Internal Revenue Service allows you to contribute a little extra to your retirement accounts. In 2024, these “catch-up” contributions can be up to $7,500 per year for employer-sponsored plans above the regular limit of $23,000, while IRAs allow for a $1,000 catch-up contribution on top of the $7,000 limit.

Map out a money-saving move: Retirement opens up the possibility of relocating to a smaller space and perhaps in a less expensive area of the country. For example, if you can pocket $300,000 in equity for a Chicago home, that’s more than enough to cover the average cost of a house in Milwaukee, which is around $200,000, according to Zillow . Located just 90 miles to the north, Milwaukee, like Chicago, sits on Lake Michigan and has a vibrant cultural scene. But it also boasts a lower cost of living, according to the Economic Policy Institute’s family budget calculator.

Look out for new income streams: If you don’t retire between now and 2033, you’ve still got plenty of time to expand earning possibilities while holding down full- or part-time work. Side hustles can actually be fun and low-stress if they involve little effort or an activity you enjoy. If you prefer to stick closer to home, renting out a garage, parking space or spare room can also make a major difference to your bottom line.