For some months now, rumors have surfaced about possible cuts in the benefits that Social Security provides to millions of beneficiaries throughout the United States. However, so far, they are just that, rumors, and nothing has been confirmed. The Social Security Administration (SSA) has not issued an official statement on the matter. According to the trustees’ latest report, Social Security benefits could take a hit for retirees, who could face benefit cuts in a few years.
Millions of retired workers rely on Social Security to supplement their income after they stop working, which is a very important income for many Americans today.
Financial experts have pointed out that Social Security faces a significant financial shortfall that could jeopardize its ability to provide benefits. This is something that both current and future retirees should have among their main concerns.
Is the Social Security System Strong Enough? Well, Yes but No
Although payroll tax money initially appears to be a reliable source of income, analysts predict that as more Americans reach retirement age and exit the workforce living longer and longer, Social Security will face a drop in its payroll tax revenue in the coming years.
All of this isn’t necessarily apocalyptic, either; the SSA can use its trust funds to maintain scheduled Social Security benefits and avoid reducing them, as long as those funds don’t run out. Will Social Security benefits be cut in the future? Cuts in Social Security benefits could be a reality due to the reduction in the main source of funding.
According to the Social Security insurance trustees, the program’s combined trust funds could run out as soon as 2034, a date that is postponed a year later according to the most recent report.
With all this information, it is concluded that reductions in benefits may not be an immediate concern for older people, at least until 2035. Despite these challenges, the trustees say Social Security could pay up to 83% of planned benefits once the trust funds run out.
That’s a really high percentage, but it’s still a cut. All this suggests then that although the reduction in profits is a tangible concern, the potential start date has been postponed and the impact will not be as great as had been estimated in previous years.
How to Get Prepared for Possible Shortages in Social Security
As we’ve mentioned recently, Social Security benefits could face reductions for the first time in their history. However, there are lawmakers who are working to intervene and prevent this in the future. Still, if politicians fail to rescue the program, it’s prudent to plan for budget cuts.
Compared to current retirees, workers and early retirees have a significant advantage. Younger people can save more money and accumulate more reserves without giving up their considerable monthly sums.
For example, you could make a plan to save about $450 over 35 years, with an average annual return of 8%. This would result in savings of about $931,000. Delaying the retirement age allows those who are close to retirement to benefit from contributions to their retirement plans. To prevent these savings from running out, you can also gradually transition into retirement instead of doing it suddenly.
On the other hand, you can opt for alternatives such as investing in stock market products or real estate investments. The latter option is particularly popular among the younger generations, as it allows obtaining rental income for many years while maintaining the original investment, which is the purchase of the property.