Social Security Faces 22% Cut in 2032. What Could That Mean for South Jersey?

More than a quarter-million South Jersey residents receive retirement or survivor benefits from Social Security, putting billions of dollars in household income at stake as the program moves toward a looming financial deadline.

The Social Security Administration projects that its Old-Age and Survivors Insurance Trust Fund will run out of reserves in the fourth quarter of 2032 unless Congress acts.

At that point, continuing payroll-tax revenue would be sufficient to pay only about 78% of scheduled retirement and survivor benefits, according to the 2026 Social Security trustees report.

That translates to an automatic reduction of approximately 22% under current law.

For South Jersey, the potential impact is enormous.

The most recent county-level Social Security Administration data show 261,535 people receiving retirement or survivor benefits in Atlantic, Cape May, Cumberland and Ocean counties combined as of December 2024.

Those benefits totaled about $540.3 million in that month alone.

If a 22% reduction were applied to that same level of benefits, it would represent roughly $118.9 million less flowing into those four counties in a single month, or about $1.43 billion over a year.

Those figures are an illustration based on today's benefit levels, not a prediction of the exact dollar loss in 2032. Beneficiary counts and benefit amounts will change before then.

But they demonstrate the size of Social Security's role in the South Jersey economy.

In Atlantic County, 57,075 people were receiving retirement or survivor benefits totaling approximately $112.4 million in December 2024. A 22% reduction at that level would equal about $24.7 million in one month.

Cape May County had 28,285 retirement and survivor beneficiaries receiving about $59.4 million, while Cumberland County had 25,905 receiving approximately $48.4 million.

Ocean County, with its particularly large retirement population, accounted for 150,270 retirement and survivor beneficiaries and about $320.1 million in monthly benefits.

'A $500 per month benefit cut'

Marc Goldwein, senior vice president and senior policy director for the nonpartisan Committee for a Responsible Federal Budget, discussed the approaching Social Security deadline Tuesday on The Lorry Young Show on WOND.

Goldwein said Social Security has been using reserves accumulated during years when payroll-tax collections exceeded benefit costs.

"In six years, those reserves run out," Goldwein said.

"And when that happens, the law says the benefits need to be cut down to match revenue," he said.

Goldwein estimated that for a typical beneficiary, the reduction would be roughly $500 per month in today's dollars.

"That's how much a typical family spends on groceries," Goldwein said. "It's tremendous."

The 2026 Social Security trustees report confirms that the retirement and survivor trust fund is projected to exhaust its reserves in the fourth quarter of 2032, at which point approximately 78% of scheduled benefits could be paid from ongoing revenue.

Goldwein emphasized that Social Security is not simply going to disappear in 2032.

Payroll taxes would continue coming into the system.

The problem is that those revenues would not be sufficient to pay all benefits currently promised under law.

What could Congress do?

Goldwein said there are essentially three broad choices: bring more money into Social Security, slow the growth of benefits or combine the two.

"I think it ought to be some combination," he said.

"And I think we should try to do it as carefully and as phased in as possible."

But Goldwein said lawmakers have waited so long that the opportunity for extremely gradual changes is disappearing.

"With only six years until this insolvency date, we lost the opportunity to do it really gradually like we should," Goldwein said.

Among the options he discussed are increasing the amount of income subject to Social Security payroll taxes, modifying the benefit formula for high-income retirees and gradually raising the normal retirement age.

Goldwein said he would personally increase the normal retirement age from 67 to 68 over approximately 10 years, then link future increases to longevity.

"So the age only goes up if life expectancy does," Goldwein said. "If life expectancy stays flat, the age stays flat."

He stressed that such changes would be phased in rather than imposed immediately on people already near retirement.

"Not people that are 60 today," Goldwein said. "But people that are 40 today, maybe they'd have to work an extra year."

A possible cap for very high benefits

Goldwein also discussed a proposal from his organization that would limit future growth in Social Security benefits for exceptionally high-benefit households.

He said some wealthy married couples with millions of dollars in assets can eventually collect combined annual Social Security benefits approaching or exceeding six figures.

The Committee for a Responsible Federal Budget has proposed a "six-figure limit" that would allow such households to continue receiving benefits but prevent benefits above a defined threshold from continuing to grow.

Goldwein said versions of that proposal could close a meaningful share of Social Security's funding gap when combined with other reforms.

South Jersey has a lot at stake

The numbers illustrate why the Social Security debate is more than a Washington budget argument for South Jersey.

SSA data show that Atlantic County had 65,865 total Social Security beneficiaries of all types in December 2024. Cape May County had 30,995, Cumberland County had 31,685 and Ocean County had 166,385.

Together, that is 294,930 people receiving some form of Social Security benefit across the four counties.

Total Social Security payments of all types in those counties amounted to approximately $595 million in December 2024 alone.

Those checks pay mortgages and property taxes. They buy groceries, medications and gasoline. They support restaurants, supermarkets, pharmacies and other local businesses.

That makes Social Security not only a retirement issue, but a significant component of the South Jersey economy.

Goldwein said the solution becomes more difficult the longer lawmakers wait.

"We just need to enact policy changes," he said.

The question now is whether Congress will do it before the 2032 deadline arrives.