Fidelity puts a price on a Social Security benefit cut

After decades of contributions to a retirement program designed to replace part of your working income, its largest trust fund is now running short. Fidelity, one of the country’s largest investment firms, has translated Social Security’s projected shortfall into specific figures.

Fidelity’s analysis estimates how a 22% Social Security benefit cut could affect a typical retirement portfolio, potentially reducing its value by six figures over a decade and forcing retirees to reconsider how much they can safely withdraw each year.

The Committee for a Responsible Federal Budget (CRFB) maps the damage across all 50 states, with no region escaping the projected shortfall.

The 2026 Social Security Trustees Report moved the trust fund depletion date forward by three months, to late 2032. For anyone within six years of that deadline, the numbers below are a reality check to run before any claims decisions.

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Fidelity estimates a $161,000 portfolio drag over one decade

The 2026 Trustees Report projected that continuing revenue would cover only about 78% of scheduled retirement payments once the fund is exhausted. Under current law, that gap would force an automatic 22% benefit reduction affecting every recipient if Congress does not intervene.

Social Security replaces between 35% and 40% of an average worker’s annual pre-retirement earnings, making it a critical source of income, Fidelity noted.

Applied to the current $2,071 average monthly benefit, a 22% cut would reduce a two-beneficiary couple’s annual Social Security income by roughly $10,935.

Fidelity modeled the impact of that annual shortfall on a $500,000 investment portfolio that served as the couple’s only other source of retirement income. Fidelity determined that compensating for lost benefits would require withdrawing an additional 2% per year from the portfolio, in addition to planned spending.

After accounting for inflation-adjusted withdrawal increases and an assumed 7% annual return, Fidelity calculated the combined drag at about $161,000. Without the benefit cut, that same portfolio would have grown to roughly $984,000 compared with only about $822,000 under the reduced scenario.

Social Security’s funding crisis reaches every corner of the country

The financial damage extends beyond individual portfolios into the broader national economy, according to the CRFB’s “No State Spared” report.

Applying a 24% across-the-board reduction to current benefits, the CRFB’s illustrative cut would pull an estimated $345 billion from retirees’ hands in a single year, the nonpartisan budget watchdog projected.

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Average monthly cuts would surpass $500 in 29 states, with Connecticut, New Jersey, and New Hampshire facing the steepest reductions. The CRFB found that Connecticut would absorb the steepest per-person reduction at $556 each month, followed by New Jersey at $554 and New Hampshire at $553.

Several factors accelerated the depletion timeline, including a lower assumed fertility rate, reduced immigration projections, and the revenue impact of the One Big Beautiful Bill Act, according to the Social Security Administration.

More than 63 million Americans receive benefits through the retirement program, including retirees, surviving spouses, and their dependents.

In 47 states, more than 15% of the population would be directly affected, with Maine at 22.9%, the largest share. Aggregate benefit cuts would exceed 1% of gross domestic product in 40 states, compounding the pressure on local economies, the CRFB warned.

Ariel Skelley / Getty Images

Retirement expert stresses that preparation remains strongest strategy

Congress has reached a deal to keep Social Security funded every time the program has approached a solvency deadline. The most significant precedent came in 1983, when a bipartisan compromise gradually raised the full retirement age from 65 to 67, Fidelity recounted.

Chris Orestis, president of Retirement Genius, told GOBanking Rates that pre-retirees must take the projected shortfall seriously without making hasty decisions, noting its potential impact on household budgets.

The program will not disappear within 10 years, and planning for retirement as if it could be gone is an unnecessary exercise.

The House and Senate introduced two bipartisan bills in 2026 to restructure the process for debating Social Security reform: the Bipartisan Social Security Commission Act in June and the PROMISE Act in July.

Other proposals target specific policy levers, from removing the $184,500 payroll tax wage cap to enrolling newly hired government workers, Fidelity outlined.

3 steps pre-retirees can take before the 2032 deadline

The six-year window before projected depletion still leaves time to prepare, and Fidelity stressed that making claiming decisions with incomplete information could end up costing retirees significantly.

Each of the following steps should be considered with the advice of a qualified financial professional who can develop a Social Security claiming strategy tailored to the household’s overall retirement income plan.

1. Delay claiming: Wait to claim Social Security benefits until age 70 rather than age 67. This can increase monthly benefits by approximately 24%, assuming the standard 8% annual delayed retirement credit applies, the SSA confirmed. The increase could help offset some or all of a potential benefit reduction, although the actual outcome would depend on the size and timing of any cuts.
2. Make catch-up contributions: In 2026, eligible workers aged 60 through 63 can contribute up to $11,250 in catch-up contributions to a qualifying workplace retirement plan, in addition to the standard $24,500 contribution limit. Taking advantage of these higher limits can help strengthen retirement savings before Social Security benefits begin.
3. Access guaranteed-income products: Fidelity also recommends considering deferred-income or fixed immediate annuities to help establish a predictable income floor. A stronger income floor could reduce reliance on Social Security and help households cover essential expenses, including housing and healthcare, if benefits are reduced.

Fidelity’s analysis highlights that households relying heavily on Social Security may face the greatest financial strain from benefit cuts.

Reviewing retirement spending assumptions and stress-testing withdrawal strategies now can help pre-retirees identify potential shortfalls and adjust their plans before retirement.

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This story was originally published October 14, 2026 at 8:33 AM.