You might think that Social Security cuts will affect the millennial and Gen Z group, however the group that is most affected by these cuts are the millions of older Americans who rely on Social Security to provide them with their primary source of retirement income.
Social Security: A Lifeline for Retirees
Citizens must note that Social Security was formed to provide financial security to retirees, vulnerable populations and spousal survivors. Millions of retirees rely on Social Security as the backbone of their financial planning. Approximately 40% of retired Americans depend on Social Security as their major source of income.
As inflation increases, retirees rely on these payments to cover essential items such as food, healthcare and utilities. Any decrease in these benefits could put them in a possibly compromising situation.
What do you need to know?
People 65 and older, who make up the majority of SSA retirement benefit claimants, are the demographic most at risk from Social Security cuts.
According to 2022 statistics from the U.S. Census Bureau, people aged 65 to 74 depend on Social Security or other social insurance programs, such as workers’ compensation and unemployment insurance, for an average of 49% of their income.
The following age group, 75 and older, has an increase in this. On average, 60% of this group’s income comes from Social Security and other government assistance programs.
Why Cuts Are on the Horizon?
The Social Security program is funded via payroll taxes which is paid by current working citizens. However, due to the large number of retirees, the SSA is facing major challenges. More people retiring means that there are less funds going into the Social Security trust fund, which is depicted to be depleted by mid-2030s.
Benefits could reduce by 25-30%. Even though, law makers are discussing solutions, these solutions come with a number of challenges as well.
The Impact on Retirees
For millions of retirees, the Social Security cuts become an issue. Many people have spent multiple years contributing to the system, knowing that they will be receiving benefits in their retirement years. A sudden decrease in payments/benefits may cause them to recheck their retirement plans and make changes that they hadn’t planned for.
Retired individuals may need to consider going back to work to make up for the lost income which can become physically and emotionally draining. Many others may relocate to an area where the cost of living if much lower, or some may even give up hobbies to save money.
The Emotional and Psychological Strain
Apart from the financial implications, the uncertainty of Social Security benefits could pose unnecessary stress on retirees. Millions of the elder population look forward to their retirement years after all their hard work throughout the years, however the idea of financial instability can lead to feelings of anxiety.
There is also a stigma that retirees may face, by returning to work or seeking financial help. The emotional trauma of navigating these changes cannot be overlooked.
The future need for change
It is important to note that the challenges which retirees are facing show that there is an urgent need for the SSA to find solutions as soon as possible. Lawmakers need to implement solutions while making sure that retired individuals receive the benefits to which there are entitled.
A few of these solutions may include adjusting benefit calculations or finding alternative sources of revenue streams.
The SSA must provide proper information for retirees to make reference to, and retirees need ensure that they are informed about all the changes so that they can plan effectively, and should they have any questions, make sure to contact the SSA as soon as possible.