Is Social Security going bankrupt? Absolutely not. Despite the abundance of rumors that the program will soon be out of money, today's workers can rest assured that they will be in line for benefits once they retire.
But will those benefits be as generous as they're supposed to be? That's up for debate.
In the coming years, Social Security expects to owe more in scheduled benefits than it collects in revenue. That's because payroll taxes are the program's most substantial revenue source, and with an anticipated mass retirement of baby boomers, that revenue stream is apt to shrink.
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Social Security has trust funds it can tap to keep up with scheduled benefits for a while. Think of those funds as the program's savings account of sorts. But once those trust funds run out of money, benefit cuts will be on the table.
In their most recent report, the Social Security Trustees said the program is looking at a trust fund depletion date of 2035. That's a year later than previous projections, which is a good thing. But unless lawmakers manage to come up with a solution to Social Security's financial woes, current and future recipients could see their benefits slashed substantially.
That's the sort of thing that could really impact your retirement for the worse -- if you let it. But I refuse to let benefit cuts negatively affect my long-term plans.
Going it alone for retirement
I fully expect Social Security to pay me some amount of money each month in retirement. But am I counting on that money at all? Nope.
When I run my personal numbers for retirement, I base my projected income on sources like my retirement savings and what will ideally be earnings from part-time work. I also hope to continue holding certain investments that serve as an ongoing revenue stream, like dividend stocks, REITs, and municipal bonds.
But I'm really not counting on Social Security to pay me anything during retirement, even though the program isn't in danger of going away. I figure if I take that attitude, any money I do receive from Social Security is just extra. And that means I won't be stressed if I don't receive the full monthly benefit I was supposed to get based on my personal earnings history.
Of course, for current retirees who are heavily dependent on Social Security, benefit cuts could be horrendous. And frankly, I'm not quite sure what seniors in that boat will do if their benefits are slashed, since boosting their earnings and cutting expenses may be easier said than done at this stage of life.
But anyone who's currently working, like me, has a prime opportunity to build up some savings and rely less on Social Security. Given that benefit cuts are a distinct possibility, that's an effort worth making. And the good news is that if you build a solid nest egg, Social Security cuts are also something you won't have to worry all that much about.
