There are millions of Americans who rely on Social Security as a financial backbone. Regardless of whether you’re planning for future retirement or already retired, Social Security plays a significant role in financial stability. However, there is a growing concern, the program may run short of funds and beneficiaries should expect to see a 21% slash within the next decade.
What’s Going on With Social Security?
The Social Security Trust Fund has been paying out more in benefits than it makes from payroll taxes. This is a result of demographic changes such as people living longer, a smaller workforce supporting the Social Security system and more baby boomers retiring.
Recent research states that if nothing changes, the Social Security trust fund benefits will be depleted by 2034. After this, the program will only be able to pay about 79% of the scheduled benefits by utilizing the ongoing tax revenue that it collects. This simply means an approximate 21% cut for everyone who is currently receiving benefits, unless a change is made.
Why This Should Worry You
A 21% cut is no small amount. For the average retired worker who receives about $1,900 a month, that would translate to a reduction of nearly $400 every month and many retirees simply cannot afford to lose this.
It’s not only older Americans that should be concerned; even future retirees and younger workers could be affected. If there aren’t changes made to the program, many might end up investing into a system that won’t fully support them when they decide to retire.
What’s Standing in the Way of a Fix?
There’s no shortage of ideas to fix Social Security—raising the payroll tax cap, adjusting benefits, increasing the retirement age, or some combination of these. But political gridlock has stalled any real reform. Social Security is often called the “third rail” of American politics—touch it, and you’re done. No politician wants to be seen as cutting benefits or raising taxes, especially in an election year.
What You Can Do Right Now
While the problem may be out of your hands, your response to it doesn’t have to be. Here are a few steps you can take to protect your financial future:
Don’t count on full benefits: When planning your retirement, be conservative in your projections. Consider the possibility of reduced benefits in your calculations.
Boost personal savings: Now more than ever, it’s important to prioritize your own retirement savings. Whether it’s through a 401(k), IRA, or other investment vehicle, the more you save now, the less vulnerable you’ll be to potential cuts.
Delay claiming if possible: If you’re nearing retirement age, delaying your Social Security claim can increase your monthly benefit. This can help offset any potential cuts down the road.
Stay informed: Keep an eye on policy developments. Sometimes changes happen quickly, and being aware of upcoming shifts can help you adjust your strategy accordingly.
Social Security was never meant to be your only source of retirement income, but it was designed to provide a stable foundation. For decades, it has done just that. But now, that foundation is showing cracks—and if nothing changes, those cracks could turn into a serious shortfall.
The idea of a 21% cut isn’t just a theoretical problem. It’s a real possibility that could have a major impact on millions of Americans. While the solution ultimately lies in the hands of policymakers, individuals can and should take proactive steps to prepare.
Because when it comes to your financial future, waiting for Washington to act isn’t a plan—it’s a risk.